Antoine Van Agtmael and Fred Bakker
© 2016, Published in the US by PublicAffairs ™, a Member of the Perseus Books Group
In our post global financial crisis (GFC) world, it would be easy to buy into the current national rhetoric that there is more that divides us than there is that brings us together. Our public discourse has never seen such a level of vitriol. The rancor of the general public with its elected officials has never been more exposed. Productivity growth seems to have slid into negative territory, real wages are stagnant, US home-ownership and labor participation rates are at their lowest levels seen in modern times. And then there is Brexit…
It sounds bleak. And yet. Van Agtmael and Bakker put forward a compelling case for turning conventional wisdom on its head in ‘The Smartest Places on Earth’, promoting their vision of economic recovery and growth driven by ‘brainbelts’ – centers of innovation and smart manufacturing. Theirs are voices worth listening to. Van Agtmael is a former financier and the World Bank official who coined the term ‘emerging markets’. Bakker is the former editor-in-chief and CEO of the leading financial journal in the Netherlands. They have some perspective on mercantile economies and the factors that drive and support growth.
In their argument, not a new one but forcefully articulated here, what if the statistics are just plain wrong, and that the true contribution of the internet economy is not being captured in our traditional way of gathering GDP and CPI data. Simply put, how do we measure the value of connecting the digital with the physical world? How does the economist capture the value of the Google search bar? The new paradigm the authors put forward is that, increasingly and going into the future, “Smart innovation, rather than cheap labor, [will] be the key competitive edge”.
Van Agtmael and Bakker posit that the collaboration amongst local governments, universities, teaching hospitals, corporations, connectors and centers of innovation and start-ups is driving a rejuvenation of the entire US manufacturing sector. We should see local production grow and global trade slow. The result will provide jobs and revitalize cities. These ‘brainbelts’ are emerging all over the country and significantly diversifying the sources of wealth production.
What is smart manufacturing? In the authors’ view it is driven around three main transformational technologies: robotics, 3D printing, and the Internet of Things (IoT). Today, according to World Bank statistics, five times more devices are connected to the web and to each other than are people – everything from our watches, cars, HVAC systems, medical devices, and the list goes on. Smart manufacturing is the ‘brainsharing’ phenomenon when you connect people making old and new things in intersection with the digital world.
The implications for commercial real estate couldn’t be more clear. Recovering, growing and more prosperous communities need homes, apartments, green spaces, leisure activities, things to buy, and places to work. We are talking in part about the reinvention of cities and how they function, and all the associated demographic and consumer behavior patterns that go along with that. Is this book a roadmap for where to invest and build or in which asset classes? No. However, it is a thought provoking overview of what trends to expect and where, all of which affect supply and demand factors core to our capital allocation and investment decisions in real estate.
The authors brush over some major issues in compiling their thesis. Privacy. Security. The jobs gap between those who will participate in this urban renewal and those who are already shut-out of the labor market. Will the rise of these ‘brainbelt’ successful cities be a source of overall growth, or will it entrench a marginalization of our rural communities and further exacerbate the social ills that are plaguing many of them today.
Nonetheless, the book is a timely call-to-arms for us each as individuals and leaders to get involved and be the drivers of our own destinies in our own backyards, where we can have maximum impact and effect positive change. Per Van Agtmael and Bakker, “…today’s innovation is more bottom up than top down. It takes place mostly at the local level, in proliferating brainbelts where academia and business share brainpower and are hard at work to invent and design the smart products that address the challenges of the twenty-first century.”
The current national tone may be disquieting. But we can certainly be inclusive and hopeful at home.
New York City-based Heather Goldman is Co-founder + President of Capstak, a commercial real estate technology company, headquartered in the brainbelt of Reno, Nevada.