7 Ways to Make Your City a Center of Innovation

In the history of the world, there have been centers of commerce, influence, and learning. Whether it was Ancient Alexandria, Greece, or Rome, these places all had one thing in common: innovation.

The modern marketplace is similar in many ways. There are consistent elements that contribute to a city becoming innovative and a center of influence. For a city to become great and have massive impact on the world, there is a set of characteristics that need to be in place.

These characteristics can roughly be put into two categories: culture and commerce.

Cultural Characteristics

Merriam Webster defines culture as the set of shared attitudes, values, goals, and practices that characterizes a group. To be clear, if we are thinking about how to build a great city that is startup-friendly, we need to acknowledge that some characteristics are better than others in working toward this goal.

Belief in Startups

There needs to be a general and genuine belief in startups across all industries, not just software and technology. The opposite of this would be a culture that downplays innovation, scoffs risk and change, and actively puts up barriers to innovation. 

Collaboration between Companies

The world is not a fixed-sum game or fixed-size pie. Just because one company succeeds doesn't necessarily mean other companies will shrink. There is such a concept that if a company innovates and create a new space, then other may benefit as well because the market overall grew. Think of cryptocurrencies, blockchain, augmented reality (AR), and virtual reality (VR). 

What this means is that if somebody has a new product or idea, companies should actively point that person in the right direction, even if it's not their own company. What matters is growth and innovation in the marketplace, not self-centered and short-term thinking for immediate survival.

Stop Shaming Short-Term Employment

There is nothing wrong with somebody working for a company two years and then moving onto the next company. In Silicon Valley, there is this notion that if do work for someplace more than 5 or 10 years, there's something wrong with you. Like, "why aren't you good enough to get recruited?".

Many places in the world still have the mentality that you should work for the same company your entire career, or at least "put in your time", before moving to a different company.

This can work, and there isn't anything wrong with it per se, but an alternative is working at different companies and industries for 2-3 years, and then moving to the next engagement. The shaming of this has to stop because it is detrimental and backward.

There can be great value to having a workforce that is mobile, fluid, and with an extremely dynamic background. Some of the best workers and critical thinkers are expert generalists, meaning, those who have a wide knowledge, background, and experience that they can pull from. I would argue that you should want a worker who has been at Facebook, Google, Tesla, Netflix, within 8-10 years, instead of somebody who has been at General Dynamics for 10 years. Right?

Yes, there can be hiccups with people who jump ship on too frequent a basis. But length of tenure is one of the worst indicators of a good worker, just remember that.

Economic Characteristics

Most people think economics means money and how to make money, but this view is wrong. The classic definition of economics is the allocation of scarce resources which have alternate uses. Basically, this means that people have unlimited wants with a limited number of options.

Similarly, the economy is not some abstract chart with a bunch of numbers. The economy is comprised of real flesh & blood individuals who make decisions every day about how to live their lives. As such, decisions can be made within cities that affect the economy and increase the likelihood of having a startup-friendly city.

Lower All Taxes Everywhere

This isn't hard to comprehend. Incentives motivate behavior (annual bonuses, work harder) while taxes penalize behavior (tobacco tax, stop smoking).

If you want more of something, incentive is. If you want less, tax it. By having high taxes in a variety of different areas, you are effectively taxing that behavior and creating less of it.

Which taxes to cut and how much? As much as you can everywhere. The money will come back in the form of revenue or investments in the marketplace. Yes, believe it or not, but less taxes equal more revenue.

Open Land for Development

They key to affordable housing is plentiful housing. Most people think Silicon Valley has the crazy housing market it does because of the weather and talent. No, this is not true. Before the 1970s, the Silicon Valley had lower than the national average housing prices. It wasn't until rent control, government regulations, and a reduction in land available for development that the prices started to skyrocket. Don't believe me, listen to the #1 Think Tank in the world, The Hoover Institution

Rent control makes this worse. The two cities in the United States with the strongest rent control policies have the worst housing market in the country, as well. Rent control hurts renters.

If a city wants to have low housing costs, that attract and contribute to talent in the area, then land needs to be available for development. Increase the supply so the cost isn't horrendous.

Maintain Fiscal Sense

This should also be common-sense, but it's not.

If a city continues to make decisions that increase taxes, rules, regulations, and long-term debt obligations, then you will not have an environment conducive to startups and innovation.

Things like high-speed trains, light-rails, massive venues and stadiums, or anything with the word "public" in it fall into this category. Again, this isn't Republican or Democrat because both are guilty.

The principle to remember here is that a city should operate very similarly in spending to how a family spends its money. Long-term debt takes money from the people in the form of taxes, and creates long-term risk and obligations that tie up that money and capital for many years, often paying interest instead of starting new companies.

Simplify Tax Codes and Payment Systems

Taxes matter, but what concerns entrepreneurs most is the complexity of the taxes. The average entrepreneur knows his space very well, but it's a whole different burden to understand taxes, deductions, exemptions, filing times, filing processes, and everything else associated with taxed money.

By having simpler tax codes and payment systems, they will be easier to understand and compliance will actually go up (less avoidance). Not only that, less resources will be spent on following rules and instead be plowed back into the startup. Reduce tax barriers and you get more entrepreneurs and new companies.

What You Should Do Now

Truly great cities come and go, which is both good and bad. The bad is that you will see greatness decline. The good is that any city, if it makes the hard choices, can become great, prosperous, and innovative.

These 7 elements will form a solid foundation and core engine of innovative growth. They are all very simple, but extremely difficult to implement and navigate. But, if you want your city to boom and create wonderfully disruptive, innovation, and life-changing startups, then you need to start here.