The Industry Standard, Oct 2, 2000 v3 i39 p180

INVISIBLE CITIES. (Industry Trend or Event) HAL COHEN.

Full Text: COPYRIGHT 2000 Standard Media International

Is the Internet making urban centers obsolete? Not a chance.

Cities have no place in the new economy - at least, that is, according to the literature of the new economy. Alvin Toffler coined the term "electronic cottage" in the '705 to describe the successor to centralized urban structure, and in the '80s John Naisbitt cheerily waved good-bye to the "abandoned cities" of industrial America. A chorus arose in the '90s to agree: Nicholas Negroponte said that high tech "will remove the limitations of geography," George Gilder called cities "leftover baggage from the industrial era" and William Knoke described our "age of Everything-Everywhere" as a "placeless society" in a "spaceless world"

Meanwhile, reality is headed in a different direction. If you want a good job as a programmer, new-media player or biotech researcher, you have a choice of living in perhaps a dozen big cities. Moreover, the most innovative firms tend to locate in highly concentrated urban districts such as Cambridge, Mass., Manhattan's Silicon Alley or the Loop in Chicago. Yet the techie prophets' forecasts of urban decline remain pervasive; there is a disconnect between reality and the popular folklore.

In the last decade or so, a handful of academic urban planners - among them William Mitchell at MIT, Manuel Castells at the University of California at Berkeley and Mitchell Moss at New York University - have reached a somewhat different consensus. Their analysis lacks the thrill-ride futurism of Toffler's or the silk-suited, boardroom purr of Negroponte's, but it has the advantage of engaging the real world.

As Mitchell, dean of MIT's School of Architecture and Planning, summarizes, they predict a complex and contradictory restructuring of economic geography, "where simultaneously some things will decentralize to get larger markets, other things will centralize in order to achieve economies of scale and still other things will mobilize because they are chasing labor." In other words, the future holds a world not so different from our own.

Who is right in this debate - the futurists or the social scientists - is a matter of more than academic bragging rights. The disagreement over cities masks a larger debate about technology's capacity for deep structural change on the one hand, and the staying power of history, culture and landscape on the other. Our faith in a world of accelerating change has led us to anticipate radical transformation at every turn. It has trained us to see revolution everywhere, when we more often are witness only to evolution.

The cities-are-dead case is simple. Industrial capitalism, it argues, needed to concentrate capital, goods, services, shipping, labor and production in one place: the city. But as high tech rewrites the rules of economics, "location" becomes - quite literally - immaterial. Who cares whether fiber-optic cable is run under Houston or Helena, code written in San Francisco or Sault Ste. Marie, a homepage accessed from Boston or Beaumont? Knowledge, information and creativity are the new commodities, and they are all perfectly intangible. Space and place become irrelevant, and there is no longer a reason for urban agglomerations.

An elegant and persuasive theory. So where did the prophets go wrong? Let us take a guided tour of their missteps.

To begin, the theory hinges on the notion famously advanced by Negroponte that "bits" - information - are replacing "atoms" as the embodiment of value. Negroponte is careful to point out that, say, sweater manufacturers are still in the atoms business. Nonetheless, he says, the real money is in the world of bits. A vast and growing majority of high-tech commodities - from software to movies to a host of services from consulting to phone sex -- are massless and placeless and thus can exist in absolute freedom, as if the world were one big info-ether.

This is an excellent bit of rhetoric, as far as it goes, but it has led to many mistaken conclusions. Forget that atoms have proven their staying power, as the current obsession with the bricks part of the bricks-and-clicks equation readily demonstrates. In the real world, even bits have to go on things (CDs, Zip disks), through things (fiber-optic, coaxial), and into things (Internet servers, PCs) for them to matter. And each of these things does have mass and location. Bits, it turns out, are still bound by the same old laws, and this is the Achilles' heel of the whole cities-are-dying argument.

Like anything else, high tech requires infrastructure, and like any infrastructure, the new tends to go right where the old was -- economic logic says to minimize risk by investing in already dominant areas. So just as 1-40 was laid down over Route 66, new telecom infrastructure like fiber-optic is run between the same important info-hubs that already dominate via copper connections, often on rights-of-way of even older infrastructure such as railroads and highways, reinforcing those networks' traditional, city-centric organization of space.

The effects of older infrastructure investments are manifest. The old Arpanet hub cities -- Boston, San Francisco, Washington -- remain dominant in the high-tech economy. Likewise, intercontinental fiber-optic cables, which terminate in Los Angeles, New York, San Francisco and Washington, further reinforce these leading cities' dominance. Every new telecom network must somehow connect to them.

This has important consequences for where businesses choose to locate. NYU's Moss explains: "Businesses want to be where they can get directly onto high-speed lines, and they don't want to have the potential for disruption or lots of bottlenecks. Large metropolitan areas are where the big information users are, and they generate the demand for Infrastructure. And once the infrastructure is in place, it generates more users in a snowball effect."

There is a deeper problem at work, though, than the simple notion that "bits" make place meaningless. Much of the high-tech gurus' logic springs from the widely held faith that technology is a great equalizer. Not only does it render place meaningless; it also undermines the validity of hierarchy. Be it a "community of commerce" or a "value net," top-down, vertical corporations are out, and with them the economic justification for cities.

As George Gilder said in Forbes ASAP, the advent of high tech "means that small, cheap, distributed technologies and organizations will prevail. ... It means that all of the monopolies and hierarchies and pyramids and power grids of industrial society are going to dissolve."

It's a pretty picture, but it so far hasn't happened, and likely never will, UC Berkeley sociologist Castells says, "None of these prophesies stands up to

the most elementary confrontation with the commanding role of major business concentrations around the world."

Indeed, it took less than a decade for the Internet, telecommunications, e-commerce -- you name it -- to be dominated by a handful of massive multimedia giants. AOLTime Warner, for example, seems a fairer harbinger of future trends than, say, Pets.com.

High tech has certainly given small businesses advantages and opportunities they never had before. But it has given big business the same advantages. Formerly ponderous corporations can simultaneously be nimble like upstart firms, dispersed like networks of collaborating companies and powerfully centralized to maintain their economies of scale. And big business lives in big cities, at the center of networks with easy access to capital and highly skilled labor.

Indeed, "decentralization" is a concept that tends to be deployed rather haphazardly in these discussions. The word generally conjures an image of an evenly spreading circle of uniform depth, like oil on water. The real world is more complex. It certainly is true that new technology -- especially telecommunications technology -- pushes connected economic systems further from the center than ever before. But this is "decentralization" only in the sense that an army is "decentralized" when its general deploys it into the field.

On the urban landscape, the most obvious expressions of such decentralization are the new concentrations of urbanism-in-suburbia that author Joel Garreau has dubbed "edge cities." These mall-and-office-park cities, whether or not they are part of a "sprawl" problem (a different issue), in fact work as forces of centralization. They bring people and resources together, buttressing the power of the metropolitan region. This is hardly the flattened city we were promised.

On a regional scale, high-tech and telecom advances do not lead inevitably to "decentralization" either. Instead they allow large firms to consolidate economies of scale while simultaneously centralizing power and decision-making. Meanwhile, they also economize on location through strategic placement of back-office and production functions.

Yes, drones can do data entry from most anywhere, and yes, an e-retailer's warehouse can be anywhere, but creative capital, media production and the cores of power remain centralized.

The result, then, is that dominant New Yorks and San Franciscos set the agendas for "second-tier" high-tech locales like Jacksonville, Fla., (the telemarketing capital of America), Phoenix (the core of the credit-card processing industry) and Memphis, Tenn., (the distribution center at FedEx's and Northwest's hubs), as well as for their own edge cities.

But will the real centers of power in high-tech cities actually be in those cities? The archetypal high-tech campus, after all, is in Redmond, Wash. According to Moss' trend-watching, though, the factors that brought Microsoft to the middle of nowhere -- especially its spirit of us-against-the-world competition -- are leftovers from a waning era. "The future is much more like Silicon Alley or San Francisco," Moss says, "where firms engaged in the same activities thrive by being next to each other, where they can access each other's products and labor forces."

To the degree that edge cities can become urbane enough to compete with real downtowns, they will; otherwise, they will become increasingly "colonial" places.

Cities are first and foremost economic centers, and how we think about them is largely a reflection of how we think about economics. The conviction that cities are in decline stems from a larger confusion over what it means to be "postindustrial." The idea, proposed by Daniel Bell during the industrial crisis of the 1970s, is deeply embedded in all of the high-tech predictions. But though Bell's paradigm-shifting neologism has framed every debate since, it has not proven very accurate. Our economy remains as industrial as ever -- since Bell's heyday, the Midwest's restructured steel and auto industries have been steadily increasing production.

What has really happened is that activities once considered "tertiary" (or "parasitic"), such as accounting, consulting and marketing, have become generators of wealth in their own rights. Thus, place-bound "industry" has not been made irrelevant by placeless "information," but rather the whole spatial system supporting both has become much more complex.

We have seen, as Castells puts it, "the emergence of a space of flows [that] dominates the historically constructed space of places." So for example, where Denver "is" in high-tech America is defined by its place within the telecom networks that link it to Dallas, Los Angeles and San Francisco; its connections to interstate and air-transport systems; and its notch in regional high- and low-tech economies. Its "actual" location in the middle of Colorado is all but irrelevant.

While this resonates with Negroponte's bits/atoms dichotomy, it leads to very different conclusions. Instead of abandoning industry, we are relocating it to rural America, where, freed by telecommunications from the need for proximity and freed by automation from the need for a large labor force, it generates wealth for wired metropolitan centers (and tax revenues for struggling towns). According to Moss, American industry looks increasingly like the agricultural sector, "which has a very low level of employment but is still very important to our economy." It makes sense that their locations should be similarly marginal. The recent resurgence of downtowns, at least in the largest of data hubs, may actually be the result of new technologies, as our cities become informational rather than industrial, and thus more agreeable places to live.

"With new technology," says Mitchell, "you can have a much-finer-grained intermixture of business and residential that enables you to develop a different kind of neighborhood structure, like South of Market in San Francisco, New York's SoHo, areas of Brooklyn and Oakland [Calif.] -- a lot of traditional urban areas that are being repurposed." The results are "vibrant, attractive, interesting places to be."

Cities, far from being "leftover baggage," are themselves finally free to cast off their industrial trappings.

America has always had a love-hate relationship with its cities. We admire them as engines of cultural, economic and political influence. But in our collective mythology, we are a pastoral nation of Jeffersonian yeoman democracy, self-reliant frontier manliness and small-town values. No wonder that since the late 19th century, when headlong industrialization and rural depopulation made cities into nightmares of overcrowding, dislocation, disease, crime and pollution, every new technological advance has been welcomed as the city's death knell.

City haters have long predicted a return to the countryside. "They thought the railroads were going to do that, they thought the automobile was going to do that, and they thought the Internet was going to do that," says Mitchell. "There's always been this anti-urban dream."

Indeed, many cities will be losers. The real-life network effects that have contributed to growth in hub cities like New York and San Francisco are equally contributing to the decline of other cities in a sort of winner-takes-all urban growth pattern. This, too, is not new. Just as Wisconsin won and Vermont lost when the United States was an agricultural nation, and Detroit won and Savannah, Ga., lost when the U.S. was an industrial nation, there will be IT winners and losers, too.

But urban America is here to stay. Despite what the gurus would recommend for high-tech businesses' strategic plans, firms and people abandoning cities will do so at their own risk. Where-it's-at will always have a "where" in it, and it will never be out in the boondocks. As the spatial forces driven by new technology take effect, cities will become different kinds of places, but they will also be increasingly central to the nation's economy. "The power of place," says Mitchell, "will prevail."