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William A. Levinson

Quality Insider

Large Cities Are Now Muda

Internet technology has ended the city’s usefulness as a center of commerce

Published: Wednesday, December 5, 2012 - 11:21

The New York metropolitan area took longer than other regions to recover from Hurricane Sandy, due largely to the logistical difficulty of getting things into and out of cities in general. Problems included, for example, gasoline rationing because of delivery interruptions. Intelligent businesses should take the opportunity to consider whether metropolitan areas themselves are now muda or waste; anachronisms that have outlived their original purposes.

Cities evolved thousands of years ago for two specific reasons: military defense and centers of commerce. Engineers could once build walls around cities, and these walls evolved into elaborate and almost invulnerable fortifications during the 17th century. Even then, however, a military engineer (e.g., Sébastien le Prestrede Vauban) who knew what he was doing could eventually defeat the strongest fortification. A fortress’s real benefit was that it compelled the attackers to waste valuable time to capture it. The invention of howitzers that could lob shells over the walls at least foreshadowed the obsolescence of the city as a place of refuge. The introduction of artillery rockets, which the British copied from those of Tipu Sultan during the late 18th century, was a harbinger of ballistic missiles armed with conventional warheads (e.g., the V-2) and, subsequently, nuclear ones.

A little more than a century later, gigantic German artillery pieces could shell Paris while zeppelins bombed England. World War II then proved conclusively that cities had devolved from fortified positions to attractive and helpless targets, and New York was of course at the top of the terrorists’ list on 9/11. Investment firm Cantor Fitzgerald had already paid an excessive financial price for its prestigious location in the Twin Towers, and it paid an enormous human price when an airplane flew into its offices. It is meanwhile noteworthy that terrorists tried to blow the building up almost a decade before, which should have suggested that relocation might be a good idea.

The idea of a city as both a high-value and soft target figures prominently in science fiction movies, in which any self-respecting monster will rampage through Los Angeles, New York, or Tokyo. (In the 1958 classic, The Blob, the alien apparently didn’t get the word on this, because it attacked a rural town in Pennsylvania instead.) If real-world monsters like terrorists or dictators acquire a nuclear bomb, it’s doubtful they will expend it on, for example, Ephrata, Pennsylvania. Internet technology meanwhile allows a business to provide financial services like those of Cantor Fitzgerald from suburban and rural locations just like Ephrata: places where rents, taxes, and other business costs are universally lower.

Hurricane Sandy showed that logistics is another issue. A major disaster like a hurricane can disable transportation around a major metropolis, with obvious consequences for businesses that depend on it. Traffic congestion is a problem even in the absence of bad weather.

Lean thinking includes the elimination of the copious muda that accompanies an urban presence, which may be summarized as follows:

Office space: As noted in National Real Estate Investor, the cost of office floor space ranges from more than $60 per square foot per year in midtown Manhattan to more than $180 in London.

If the job involves knowledge work, as is common for financial services, telecommuting can eliminate the need for any office space for most employees.

Cost of living: Higher costs of living translate into higher salary costs for the business and a lower standard of living for the worker. The worker’s real compensation consists not of his pay in dollars, but rather what he can buy with it. As an example, $47,029 a year will buy in York County, Pennsylvania, what $100,000 a year will buy in Manhattan, according to the CNN Money cost-of-living calculator.

Taxes: Expect higher taxes, including income and sales taxes. Large urban areas often add their own, on top of state taxes.

Traffic congestion: Traffic adds to the cost of commuting and transportation.

Risks: Risk management is a key aspect of business planning, whether for terroristic violence or natural disasters.

The bottom line is that the city is an anachronism, a holdover from previous centuries in which it served as a defensible refuge and a center of commerce. Its role as a defensible refuge ended a hundred years ago, and Internet technology has ended the city’s utility as a center of commerce. A large city of the 21st century is simply a place to pay more and get less, and businesses can quickly realize substantial bottom line returns through relocation and elimination of the muda.

Henry Ford told us in My Life and Work (Doubleday, 1922) how to solve these problems 90 years ago (emphasis is added):

“Industry will decentralize. There is no city that would be rebuilt as it is, were it destroyed—which fact is in itself a confession of our real estimate of our cities. The city had a place to fill, a work to do. Doubtless the country places would not have approximated their livableness had it not been for the cities. By crowding together, men have learned some secrets. They would never have learned them alone in the country. Sanitation, lighting, social organization—all these are products of men’s experience in the city. But also every social ailment from which we to-day suffer originated and centres in the big cities.... A great city is really a helpless mass. Everything it uses is carried to it. Stop transport and the city stops. It lives off the shelves of stores. The shelves produce nothing. The city cannot feed, clothe, warm, or house itself. City conditions of work and living are so artificial that instincts sometimes rebel against their unnaturalness.

“And finally, the overhead expense of living or doing business in the great cities is becoming so large as to be unbearable.It places so great a tax upon life that there is no surplus over to live on. The politicians have found it easy to borrow money and they have borrowed to the limit. Within the last decade the expense of running every city in the country has tremendously increased. A good part of that expense is for interest upon money borrowed; the money has gone either into nonproductive brick, stone, and mortar, or into necessities of city life, such as water supplies and sewage systems at far above a reasonable cost. The cost of maintaining these works, the cost of keeping in order great masses of people and traffic is greater than the advantages derived from community life. The modern city has been prodigal, it is to-day bankrupt, and to-morrow it will cease to be.”

If you want more on Ford’s thoughts about this topic read Ford Ideals (Dearborn Publishing, 1922). It includes a chapter called “The City: A Pestiferous Growth.”

Discuss

About The Author

William A. Levinson’s picture

William A. Levinson

William A. Levinson, P.E., FASQ, CQE, CMQOE is the principal of Levinson Productivity Systems P.C. and the author of the book The Expanded and Annotated My Life and Work: Henry Ford's Universal Code for World-Class Success.

Comments

Costs vs Benefits

Mr. Levinson-  Too many of your articles focus on cost control (muda).  I take as evidence this article, as well as your article on how all schools should be replaced with remote learning.

There is more in life than cost control.  Not all costs are bad.  Societies and businesses incur costs if the marginal benefit are greater than the marginal costs, as is taught in basic economics, and indeed, life.

Cities and their supporting infrastructures grew and developed because the marginal benefits of centralized tranportation, communications, manufacturing, education, cultural development, religous worship and even government services exceeds the marginal costs of maintaining and supporting these infrastructures.  This marginal benefit still exists even in the wake of natural disasters, which have been occuring for thousands of years. Cities endure.

School building exist because students, as a whole, respond better to teachers, and centralized buildings, than a computer terminal.  Schools teach children how to relate to their peers and superiors, how to behave in groups, how to drive.  Sure, remote learning couldl be more efficient for some, but will our society be better off if there is a proliferation of people who have not had to relate to anyone but their family?

Is your life empty of cost?  Is there not a single photo or picture festooning your walls?  Is your home not burdened with a single printed book? If you live in the suburbs, have you paved over your lawn?  Using your logic, there should be none-it is all muda, waste.  Yet, I think you find value in these wasteful endeavors.  Why?  It may be you find a benefit to these expenditures, but maybe I am incorrect.

I would encourage your future columns to focus on investment.  Otherwise, I will consider your articles to be a broken record, and simply stop reading them.  This is the worst fate a writer could face.

 

Regards,

 

Tom Johnson

City benefits in the country

You can have access to city culture without paying to live in the city. Suppose, for example, that a firm like Cantor Fitzgerald relocated from NYC to Lancaster PA (where I grew up). The cost of living would be much lower, but Lancaster is on a commuter rail line that connects to Philadelphia. Employees could enjoy Philadelphia's cultural activities without the need to drive and park. When I lived in upstate New York (Poughkeepsie area), I often took the Metro-North to New York City for professional and cultural activities. I did not have to pay NYC's taxes or living costs to access, for example, a Broadway show.

A Narrow Take on Cities

An interesting intellectual exercise, but your arguments favor a certain point of view, one that looks entirely at costs, infrastructure and your own personal preferences. I know you're talking about business locations, but you completely sidestep a larger body of evidence and the human and cultural elements that make cities far more desirable - for many - than suburbs or exurbs will ever be.

Cities are the traditional hubs for creativity, education and the arts, a melting pot of mutiple cultures and viewpoints that many believe do not and cannot exist elsewhere. The cities (and their universities) draw in the intellectuals and information workers that thriving businesses are now clamoring to hire. Establishing an office outside a city considerably diminishes the available pool of information workers that are preferentially living in cities and driving the economy.

Some of your listed wastes are negligable issues for many city dwellers. Yes, cities do often have a higher cost of living, but those within the city often use public transportation or even walk to work and local businesses. Why do you think everyone drives or even owns a car? There are many articles out there that document the move, especially for young professionals, BACK to the city.

Perhaps I missed something in my read of the article, but if the goal was to be more than just provocative, a comparison of city muda and external muda would have revealed a different conclusion. The wastes of living OUTSIDE the city include energy costs (gasoline as a necessity to get anywhere, need for personal transportation and insurance), envirnomental impacts (less recycling, higher energy use), and increased crime (a documented trend, see below).

Here's an interesting infographic on the topic: http://thehickoryhound.blogspot.com/2012/08/decline-of-suburbs-interesti.... A Web search on "decline of the suburbs" will lead to additional statistics and details on the trend. Would this be happening if there was the widespread view that a city was an anachronism?

Could the problems have other causes?

This article compared the ability to recover from an earthquake in Kobe, Japan and Los Angeles, CA http://reason.com/archives/1998/01/01/shaky-recovery. Perhaps the problem isn't size, but regulations and restrictions. Or, even deeper problems such as the expectations and attitudes of the citizenry. It's still Muda, but perhaps from a different source.