A shorter version of this post originally appeared at Next American City, where I was live blogging at the 20th anniversary of Living Cities.
Steven Johnson and Paula Ellis, of the John S. and James L. Knight Foundation, discussed some of the themes in his new book, Where Good Ideas Come From: The Natural History of Innovation, including the unique environment for innovation that cities provide. Johnson draws on the work of Jane Jacobs and Geoffrey West to demonstrate that innovation is most likely to happen in places where humans are densely clustered because entrepreneurs rely on the work of others. Both to see through the uncertainties of the future to realize profitable ideas, and to overcome the challenges of product development, entrepreneurs need to live in urban areas.
Johnson began his conversation explaining that many of the ideals that emerged in the Scottish Enlightenment came out of coffeehouses, through the spontaneous conversations that many brilliant men had, and the evolution of their ideas in this urban space. Looking back to these Enlightenment ideals, we can see that Adam Smith, perhaps one of the original urbanists, explained that the division of labor is limited by the size of the market. Continued urban growth provides individuals with growing opportunities to specialize, as both the consumers and technological developments that fuel the market process are consolidated in the same place.
In West’s work that Johnson referenced, he explains that, unlike firms that become increasingly bureaucratic and inefficient as they grow, cities continue to become more productive as they grow in size and density. As Johnson explained, cities have a “liquid property because they have the convergence of diverse people sharing a space. This is an incredible asset.” West demonstrates that the relationship between city size and innovation is exponential. “What the data clearly shows, and what [Jacobs] was clever enough to anticipate, is that when people come together, they become much more productive.” Smith demonstrated that wealth grows through the exchange that urban environments make possible.
However, unlike other scholars of entrepreneurship, Johnson diminishes the importance of profit in facilitating entrepreneurial alertness. Megan McArdle points out that he places a greater importance on “openness and inspiration” than on the profit motive in facilitating entrepreneurial innovation. Of course, entrepreneurs don’t operate in vacuums. Entrepreneurs living in a densely populated city will draw on each other’s work — and find markets for their products — more so than in less densely populated places. And the legal environment surrounding intellectual property, or openness, certainly affects innovation. Despite these outside influences, though, the profit motivation and the essential feedback mechanism that profits and losses provide cannot be downplayed in the market process.
Urban scholars from Jacobs to West to Johnson have built on the insight that dense populations facilitate innovation, where the size of the market is continually growing. While it’s often easy to fall into critiques of urban policies and focus on the challenges facing individuals in cities, yesterday’s conversation struck a happily optimistic note.