New York is a hell of a town, but technology is threatening its leadership in almost every category. High-speed trading and shadow banking threaten its strongholds in finance. Digital publishing and social media continue to disrupt magazines and newspapers. Streaming is upending television broadcasting, while enterprise software is displacing lawyers and accountants. New York’s public services—from schools to subways—are antiquated.
For centuries New York has evolved. With its deep port, the city dominated U.S. trade through the late 1800s. But that wasn’t enough to employ the swarms of immigrants coming through Ellis Island. So the city transformed, creating higher-paying jobs. By 1910 some 40% of all New York workers were employed in manufacturing—the garment industry, sugar refining, publishing and even bread making. My grandfather was in the millinery business. Manufacturing lasted even through the 1960s. I remember seeing shirts made in the Empire State Building. Total employment in the city peaked in 1969.
As post-World War II technology drove transportation costs down, manufacturing moved to the suburbs (and eventually Asia). Most large American cities stagnated. But New York transformed itself again, this time into a service economy with high-paying jobs in finance, media, fashion, law, accounting and health care. It also remained home to the most important stock market in the world. Today well over 90% of New York employment is in services, according to the New York state government.
But the city has arrived at a nasty inflection point again. New York risks becoming another Detroit. New York needs to embrace entrepreneurs, not repel them. No more Zuckerbergs heading west.
What form of transformation lies ahead? Some suggest New York must become the next Silicon Valley, a mecca for geeks to create the new multiprotocol routers and alternative energy processes. That’s been tried before and always fails (see Research Triangle, Bangalore, Cambridge, England, or Skolkovo, Russia). Instead New York needs to build on the technology that comes out of Silicon Valley and elsewhere, especially artificial intelligence and fintech, and use these advances to transform New York’s businesses.
Understanding these trends, then-Mayor Michael Bloomberg in 2011 launched an “applied science” competition, offering city land for a new campus. Stanford and Cornell wanted in, with the latter focused “on digital technology and its transformation of individuals, society and the economy.” This week one of the first new urban campuses in generations, Cornell Tech, opens on Roosevelt Island. As a Brooklyn-born Cornell engineer, I played a tiny role.
While New York shouldn’t try to create its own Silicon Valley, it definitely needs to adapt the Bay Area ethos: Focus on research. Encourage risk taking. Embrace failure. Reward collaboration. Attract immigrants and venture capitalists. Build networks of experienced workers. Take advantage of nearby universities. Get professors to train the next generation of students and to work with local business leaders to spin out important technologies. The status quo only brings woes.
But there’s a long way to go. My fear is that New York could be hollowing out again. The city is 8.5 million strong, but it took until 2012 to get the number of jobs back to the 1969 peak. The New York metro area is a $1.5 trillion economy—about the same size as Canada. For this transformation, an enlightened set of tax and capital-formation policies are critical to attract money and experienced entrepreneurs. A break on capital-gains taxes would do wonders. Wall Street can be the funding source for innovation as the structure of business reinvents and makes a brand new start.
Hence the eventual 2-million-square-foot Cornell Tech campus, which will ultimately host thousands. This and other programs are needed to stir up the melting pot and see what emerges from the primordial ooze of professors, entrepreneurs, students, venture capitalists and business leaders. This is the recipe for transformation.
And my role? During Mr. Bloomberg’s competition, Cornell asked me to write an opinion piece about who should win. Given the obvious conflict of interest, I declined and instead wrote something another alum might use to frame the pitch. Shortly thereafter, the Bloomberg team said the press would not influence their decision. Cornell instead ended up using a form of what I wrote as the introduction to its proposal. And you just read it.