* * *
The Information Revolution
The roots of the cities' resurgence can be found in a massive transformation taking place in the world economic structure. Information is beginning to replace industrial production as the economy's driving force. That's why urban areas with a concentration of knowledge-intensive industries are making a comeback; their areas of strength are those that can generate high-wage jobs. Meanwhile, agriculture, mass manufacturing, and retailing -- the traditional backbone of rural Valhallas -- require increasingly fewer workers and in many cases provide largely low-wage employment. The once-torrid growth in states of the Valhallan hinterland -- such as Colorado, Utah, Arizona, and North Carolina -- shows definite signs of slowing.
When it comes to knowledge-intensive industries, one advantage of urban areas is their ability to promote interaction among companies, their customers, and their suppliers, enhancing the flow of information and the exchange of ideas. To a large extent, notes Sol Dutka, that's why market-research and other high-end business-service companies originated, and have continued to flourish, in the New York City area, even as whole other industries have fled to the hills. The higher fixed costs of doing business in a place like Manhattan -- tax, regulatory, housing, and labor costs, for example -- are more than balanced by the advantages of being close to the "action."
Take Audits & Surveys, which Dutka launched with $15,000 in 1953. Combining the statistician's precision he developed while working on the Manhattan Project during World War II with a long-standing interest in the dynamics of human behavior, he offered clients specialized insights that their own market-research staffs often failed to perceive. Dutka says that New York's density of service providers, academics, think tanks, and artists has provided a powerful strategic advantage -- even for out-of-town clients like Coca-Cola, AT&T, and Ford. And their proximity helps him give clients better information and speedier turnaround. "I can get 24-hour service for anything in New York, whether it's in graphics, getting extra time on someone's computer, or getting something photographed," he says. "It's terribly important. You want a consultant or a technician? You can get one at a minute's notice."
Dutka's perceptions are clearly shared. New York City continues to dominate the world of high-end business services. Today, of the top 50 market-research companies in the country, 6 are in New York, by far the most in any urban area. Equally impressive, the New York metropolitan region boasts 14 of those top 50 companies; no other region claims more than 3. The city's primacy extends across a large number of service fields, particularly in finance and international trade.
* * *
The Rise of the Digital City
Despite all the talk about "lone eagles" operating from their high-tech aeries in the country, perhaps the best example of the urban resurrection lies in the "electronic cottage," or home-based business. The 10 highest concentrations of electronic cottages are found not in Charlotte, Boulder, or Bend, but in decidedly urban areas such as downtown San Diego; midtown and downtown Manhattan; Beverly Hills; Santa Monica; and Berkeley, Calif. (See "The 10 Highest Concentrations of Electronic Cottages," below.)
Similarly, the largest colonies of the hottest new branch of the communications industry -- multimedia companies -- are in urban areas. Most major developments in new communications technologies have come out of the San Francisco Bay Area or Southern California, which together account for roughly 60% of the total industry, or from centers in cities like Seattle or New York.
By settling in the cities, the new digital-communications industries are beginning to reverse the trend of migration to the edge cities and rural Valhallas seen in the recent past. Much of the Bay Area's multimedia industry, for example, is clustered not in Silicon Valley but in the urban core of San Francisco.
With its ties to Silicon Valley and its well-developed network of services for large corporations, San Francisco is a natural location for the development of Web sites and kiosks. But what's surprising is Manhattan's rise as a key center of the multimedia industry. New York City, an almost complete nonentity in the personal-computer explosion of the 1980s, now boasts as many as 50,000 people working in a diverse array of multimedia enterprises. That, notes Steve Schklair, vice-president of new media at Digital Domain, in Venice, Calif., is linked intimately with the city's traditional strength in communications and publishing.
But it's in Los Angeles that the multimedia revolution may be finding its fullest expression. Los Angeles has more multimedia companies than any U.S. city. And as in New York City and the Bay Area, much of the L.A. interactive and multimedia scene is clustered not in the edge cities but closer to the historic core of the city. The lion's share of the roughly 150,000 people in multimedia in Southern California, according to regional economist Rohit Shukla, work in urban Los Angeles County.
Why the multimedia explosion in L.A.? As with the boom in business services, it all has to do with the way the entertainment industry continues to flourish and grow in the Los Angeles basin. Although low-cost states such as Nevada, Arizona, Utah, Oregon, and North Carolina made valiant efforts in the field, last year Southern California gave birth to 439 of the nation's 720 film-industry start-ups. That was 100 more film start-ups than Southern California had seen the previous year. And it was more than the total number of film start-ups for the next three leading film-producing states combined. Only New York State, with 73 start-ups, even broke above 20 start-ups.
