Wonder in Flyover Country about mass emigration from the coasts to the heartland has evolved quickly from a sensible theory to an inkling to an expectation to a reality. It’s something we need to get our arms around even as it is in the early stages of what Chief Executive magazine called a “great reshuffling.”
I wrote the piece that Chief Executive has just published online about how Covid has set in motion some huge new dynamics that will affect the geographic execution of business and the entire functioning of the U.S. economy in the years to come. A major part of this reshuffling, I wrote, has to do with “Coasts vs. the Interior.”
Here’s what I wrote:
The middle of the country clearly has been gaining on the coasts in the midst of the pandemic, aided by the technological dispersion of white-collar work and heartland attractions, including lower costs of doing business, less expensive housing, reasonable taxes, strong schools and underrated quality of life.
“Large heartland metropolitan areas like Nashville, Austin, Detroit, San Antonio, Grand Rapids and Dallas-Fort Worth are all gaining educated millennials far more rapidly than coastal ‘magnets’ like New York, Los Angeles or even the Bay Area,” [says Joel] Kotkin, [renowned demographer and head of the site NewGeography.com].
What’s more, a post-Covid “rubber-bander” phenomenon is snapping more young workers back to their birthplaces. “People will say, ‘I can go live in the Rockies or near my mother in Mankato, Minnesota—or just about anywhere if you’re valuable enough to your company,” says [demographer Wendell] Cox. “It’s a much broader reset than ever.”
By January, in fact, three major companies—Tesla, HP Enterprise and Oracle—said they would spurn California to move their headquarters to Texas, where Chief Executive consistently has found America’s best business climate. First Databank, for example, “accelerated” its move of jobs from its headquarters in South San Francisco to satellite offices in Indiana and North Carolina.
“They’ll see a little more growth over time, though I wouldn’t say it’s being driven by the pandemic in a major way,” says Bob Katter, president of the publisher of drug-information software. California is a “more expensive place to do business,” but there’s “tremendous talent there. So we’re trying to strike a balance.”
Meanwhile, as Antoine van Agtmael and Fred Bakker argue in the book, The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation, the Midwest already has become an epicenter of a growing interface between manufacturing and technology, where a legacy of industrial expertise is fertilizing growth in technologies ranging from self-driving cars to digital agriculture.
Flyover-country business legacies also are benefiting companies like Clearcover. The Chicago-based startup provides online car insurance and employs about 150 tech workers in downtown Chicago. Why not design Clearcover’s ecommerce capabilities in Boston, New York, San Francisco or Seattle? One key is that much of the traditional insurance industry grew up and still resides in Chicagoland.
“We went through an analysis and tried to find the best overlap between a market where we could find world-class tech talent, great insurance talent and where we could raise a lot of capital,” says CEO Kyle Nakatsuji. “It boiled down to Chicago and the coasts, and Chicago won on better access to all the insurance talent from Allstate, State Farm, Kemper, Aon and other insurance companies here.”
Still, many doubt that economic shifts from dominant coastal nodes will be extensive. “Whether it’s Hollywood for entertainment, Hartford for Insurance, Silicon Valley for tech or New York for financial services, you will find that for another city to develop the capabilities to support these industries from nothing is a lengthy and difficult process,” says Antonio Argibay, founder and managing principal of Meridian Design Associates, an architecture and design firm with offices in Miami and New York City.
The fate of New York is perhaps the biggest issue in this arena. “It’s too early to tell” whether there might be a permanent aversion to the Big Apple by CEOs and their employees, [Jon] Cesaretti, [a tax-practice leader for consultants Crowe Horwath,] says. But he believes apocalyptic scenarios will be proven wrong. “New York has seen much worse. In the ‘70s and ‘80s, New York was a disaster, and it came back. I have a hard time believing it will be abandoned now.”
William Sankey lodges a firm vote of confidence in his hometown. “We continue to see professionals—even people we hire in other markets—still have a desire not only to come back to the office but to move to New York,” says the CEO of Northspyre, which produces software for running real-estate projects from its headquarters in Brooklyn and elsewhere. “That speaks volumes about how modern workers feel about wanting to work together in a creative environment in cities.”