2 October 2023. Cities | Business risk
Cities as attractors // How businesses were blinded to the nature of risk
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1: Cities as attractors
Jonn Elledge has a piece on his Substack—and outside of his paywall—in which he constructs a list of what makes some cities more visitable than others. It’s an interesting list, and some of these features are also about what makes some cities more liveable than others.
He’s prompted in these thoughts by a work trip to Liverpool, in the north-west of England, which still felt like a break:
there’s something about the place that makes it feel like a plausible destination for a minibreak, in the same way that Lyon or Ljubljana do but Leeds or Leicester do not. I’m clearly not alone in this: over the last 15 years or so, Liverpool’s tourism sector has boomed.
These are, he reckons the ingredients of a city that is attractive to visitors.
Set piece architecture or views
Can be natural glories, great old buildings, even a particularly good bridge... (they) have something about them that feels worth “seeing”, in a very literal sense.
(Rainbow over the Liverpool waterfront. Image: William Starkey, via georgraph.org.uk. CC BY-SA 2.0)
High quality water
We’re not talking drinking water here. Elledge means stretches of water that feel central to the life of the city, like a big river or some striking coastline.
I think the water has to be some combination of substantial, central and picturesque... a city doesn’t absolutely have to have that.
But if it doesn’t it needs some other bits of nature to fall back on. As in:
High quality parks
Cities need lungs, people in them need space. I think a place can get away without either green or blue, but I don’t think you can do without both.
Interesting restaurants, clubs or bars
Because one of the points of going somewhere is to sample the nightlife.
Interesting galleries, museums or other visible heritage
... you want stuff that makes you feel clever and virtuous during the day, too.
Pedestrianisation
(A) sizable stretch, or at least portion, of the city centre in which you don’t need to interact with cars. This, it took me an embarrassingly long time to spot, is why I have fallen in love with basically every Spanish city I have ever been to – because they basically all have pedestrianised old cities and plenty of plazas.
Experience shopping
He seemed a bit reluctant about this one, but came to the conclusion that, at least when you’re visiting,
I think people like to spend money in places where it feels fancy to spend money... almost every city break I have ever been on or heard tell of seemed to involve a trip to a shopping district/covered market/souk.
That’s the list. There’s some context here. He writes about the way in which both Liverpool and Bilbao have used the space left by industrial decline to reimagine their waterfront areas.
Getting the Guggenheim changed that, but so did the redevelopment of the entire riverfront; the fact there’s a moment, on the drive in from the airport, where you come out of a tunnel through a mountain to see the entire valley of the city laid out before you surely helps, too.
Hamburg, too, has done something similar. He also writes about the way that Barcelona reconfigured its waterfront to connect the beach to the city.
There’s also a discussion of the role of cultural development in all of this. One of the things that helped to transform Liverpool was being the European City of Culture in 2008. But perhaps this is a longer game: Tate Liverpool, overlooking the waterfront, opened in 1988.
(Tate Liverpool and the Albert Dock. Photo: David Dixon via geograph.org.uk. CC BY-SA 2.0)
Some of this reminded me of Rosabeth Moss Kanter’s metaphor that successful cities have to be both magnets and glue. The items on Elledge’s list are the kind of things that help as magnets: they put a city on the map, they attract people towards it.
The glue is the things that make people want to live there permanently. So, in addition to the attractors, it includes stabilisers like good local and regional transport, good schools, good healthcare, and so on, and also things like good local spaces such as parks. They also need good local labour markets.
Kanter was looking at this through the lens of places seeking to attract businesses and organisations to their local economy, and her metaphor emerged from a long research project on the way that the knowledge and services economy had re-shaped location decisions:
Cities and regions will thrive to the extent that the businesses and people in them can develop better by being there rather than somewhere else. To create this capability, communities need both magnets and glue. They must have magnets that attract a flow of external resources—new people or companies—to expand skills, broaden horizons, and hold up a comparative mirror against world standards... Communities also need social glue—a way to bring people together to define the common good, create joint plans, and identify strategies that benefit a wide range of people and organizations.
She also notes that as well as the kinds of physical infrastructure mentioned above, they also need a softer infrastructure to ensure that this kind of place-making works:
(C)ommunities need an infrastructure for collaboration to solve problems and create the future. Community leaders must mount united efforts that enhance their connections to the global economy in order to attract and retain job-creating businesses whose ties reach many places.
These are long games: she notes in her research that one of the common factors for success is local leaders—political leaders, community leaders, business leaders—who have been personally committed to the development of their cities for years.
From a UK tourism point of view Elledge makes a case for a west Yorkshire city that I would have overlooked:
My wildcard suggestion is Halifax (honestly, the Piece Hall, the covered market, the views of the Pennines... if it wasn’t off all the main transport links I reckon it’d be another York).
2: How business was blinded to the nature of risk
There were some intriguing charts in an email from Bloomberg last week which suggested that Apple manufacturing plants in Asia were particularly vulnerable to flooding and sea level rise. Even today, 14% of them are at risk. The chart suggests that at 3.5 degrees warming, 69% will be at risk, although most of the things we know about a 3.5 degree world also suggests that if it happens flooding would the least of Apple’s business problems.
The email points to an article by a team of Bloomberg reporters that seems to be outside of the paywall, although that may change. Apple’s not alone: the whole electronics sector has this problem:
Drawing from global databases of power-generation, extreme weather, flood zones, economic impact and carbon emissions, Bloomberg Opinion found that the very regions most vulnerable to climate change are those with the highest concentration of manufacturers. This risk isn’t exclusive to Apple. Global electronics companies including Samsung Electronics Co., Sony Group Corp. and Dell Technologies Inc. procure from many of the same vendors.
The reason that Apple’s supply chain is used as the case study is because the company is much more transparent than its competitors about its supply chain.
Apple has been vocal about its climate change commitments, both under Steve Jobs and under the present CEO, Tim Cook:
The iPhone maker boasts that it has been carbon neutral across all its offices, stores and data centers since 2020, and cut emissions by 45% since 2015. “By 2030, all Apple devices will have a net-zero climate impact,” Cook said in a recent skit where he’s quizzed by a fictional Mother Nature played by actor Octavia Spencer.
But a lot of its plants are in countries whose energy systems are basically dependent on coal or other fossil fuels.
This is about to become a business problem. As the article notes, the EU is about to introduce levies designed to reduce the competitiveness of products manufactured in carbon-intensive markets. But as Jessica Karl point out in the newsletter email, it’s not coincidence that Apple’s manufacturing plants are where they are:
In many of the countries, production can carry on because there’s really no rules to stop them. Emissions standards are far more lax, and regulatory overlords are not peeking over anyone’s shoulder. This kind of climate loophole is often referred to as “ carbon leakage.” So while Apple may love to boast about its carbon-neutral HQ, stores and data centers, the behind-the-scenes production of its devices is still very much a dirty business.
While I was reading this piece I was reminded of the US car companies’ dispute with the United Auto Workers. For the first time in history, the UAW—under a new, radical, President, Shawn Fain—is striking against all three of America’s ‘big three’ at the same time. It’s not an all-out strike: the UAW is calling out members in particular locations for short “stand-up strikes”, aimed at particular places in the supply chain, described in one commentary as like playing the game ‘Battleships’ when you can see your opponent’s ships. In some locations they are also using a tactic called “Eight and Skate”, which basically means that you don’t work any overtime.
The strikes are designed to restore pay, which has fallen over the last years, and improve conditions, as well as about the right to unionise electric vehicle plants. There’s a lot at stake here. The companies say they can’t afford it, although they have made offers, but wage costs are only 5% of the cost of a car, and GM and Ford have paid out between them $18 billion in shareholder buybacks over the last decade.
What reminded me of Apple was a piece about the strike by the indefatigable Cory Doctorow on his blog. He suggested that the car companies had made themselves vulnerable to these tactics through their pursuit of efficiency.
The automakers—like every monopolized, financialized sector—have stripped all the buffers and slack out of their operations. Inventory on hand is kept to a bare minimum. Inputs are sourced from the cheapest bidder, and they're brought to the factory by the lowest-cost option. Resiliency—spare parts, backup machinery—is forever at war with profits, and profits have won and won and won.
At the same time, because the companies have tried to avoid hiring, they have become very dependent on overtime, as David Dayen noted:
There are simply not enough workers at many auto plants to meet production goals. As a result, the companies turn to existing workers, paying them time and a half, or even double and triple time, to stay on the job. Management at some facilities consistently asks workers to work through their breaks or even lunch.
What links these two very different stories? Two things, I think. One is that the business and financial climate of the last forty years has all been about shareholder returns, and that’s led to a whole generation of business executives who are at least as interested in the price on the stock ticker as making the business work. This leads to cost savings wherever they can be found, even when they make the businesses vulnerable to supply chain disruptions.
Of course, in theory, the ‘independent’ (non-exec) directors on the board are supposed to be there to ask questions when businesses make decisions that open up these kinds of risks. But since they have mostly grown up in the same financialised business worlds, they don’t notice these risks either.
The second is that globalisation meant that businesses could be pretty cavalier about production in general and workers in particular. But that is reversing itself now. In Apple’s case, location choices that were designed to keep production costs down are suddenly connected to other business issues. Similarly, in the case of the US Big Three, trying to get by with as few workers as possible has turned out to be a business strategy that is likely now to be about backfire on them.
UPDATE: SOCIAL ATTITUDES
I wrote last week about the changing attitudes in the UK as seen in the latest British Social Attitudes survey. At the Comment is Freed newsletter, Sam Freedman took a look at the same data from the perspective of political perspectives.
One of his charts struck me because I have noticed this same effect when analysing patterns of drivers of change for systemic effects, but without data to support it. The hypothesis was that in the face of greater volatility (food, energy etc), people had greater expectations of the government. British Social Attitudes has a chart that suggests this is the case.
(Source: British Social Attitudes, 2023. NatCen)
Freedman’s commentary:
The chart... shows the mean score of all the government responsibility questions combined. Labour supporters are roughly back to where they were in the mid-1980s, whereas Tory voters are more in favour of state intervention than at any previous point... It seems... likely to be a function of important government interventions on covid and energy bills that made a difference to peoples’ ability to weather those storms, as well as the general sense of decay. A small state seems a better idea when times are good.
There’s also some mysteries in this data, although they may be data effects. But it’s worth noting that the lines started trending upwards just before the financial crisis, when oil prices went through the roof. I’m not sure what to make of the downturn in both lines between 2012 and 2016, at least without having time to go back into the BSA data. It might, though, be the result of the barrage of media and political populism that preceded the Brexit vote.
j2t#502
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