City’s Economic Future Linked to Brain Power

Over time, scholars of urban life have explained New York’s special qualities in various ways. Our city, from its birth as a Dutch harbor to the construction of the Erie Canal, was first a gateway economy. Then, as other cities surpassed New York as a port and a manufacturing center, New York became America’s center for more modern forms of commerce, centered on three crucial industries: finance, insurance and real estate-what came to be labeled the FIRE sector of the economy.

The FIRE sector turned on locational advantage. In an economy fueled by the stock market, businesses found real opportunity in locating near the trading floor. This was the way to conduct daily, and even hourly, transactions. Insurance followed finance, and real estate thrived. The world impact of the FIRE sector combined with high-paying jobs to create a value premium that propelled the city’s growth and validated New York’s claim as the world’s capital.

Yet as this new century dawned, the number of city jobs in finance, insurance and real estate was dwindling-down 15 percent (from 506,000 to 433,000) over the last 15 years. And, as we look forward, cyberspace increasingly will deny oxygen to New York’s FIRE sector; today’s chief executives can conduct business from Aspen or make deals from the Caribbean. They plan their lives and the locations of their businesses accordingly.

Instead of physical proximity, the channels of commerce soon may be primarily fiber-optic cables and network servers. Even today, a stock-market trade by a specialist takes an average of 12 seconds longer than an identical trade performed electronically. Those seconds can translate into millions. While neither the NYSE nor its specialists will be obsolete-specialists will still be needed to control volatility, and the exchange will adapt and evolve-proximity will be discounted in a market that can be accessed from virtually anywhere.

The effect of this change on New York is potentially profound. Although FIRE will remain important for some time, it seems unlikely to be viable as a long-term strategic base. And finding a replacement won’t be simple. Surely the solution is not to be found in relative tax and cost advantages, vis-à-vis Route 128 in Boston or the Research Triangle in Raleigh-Durham, N.C.

However, there is a pathway to a new value proposition for New York. Cities exist because they draw people together. Regardless of the future of the FIRE sector, there are unique assets here in New York that increasingly will sustain our city as a world city. Our intellectual, cultural and educational (ICE) assets-already among the world’s greatest-will become the essence of New York’s being.

The elements are already in place-experienced, but not known, by most New Yorkers. Consider just a few statistics: New York State has become the leading destination for freshmen leaving their home state for college. Our state is home to more of the top 10 universities and liberal-arts colleges than any other state, and six of our universities (again, more than any other state) house research medical schools that rank among the nation’s top 50. New York City’s universities drive much of this. There are more college students in our city-per capita-than in any other city. It should surprise nobody who is aware of this data that New York is the intellectual capital of the world in fields as diverse as philosophy and soft-condensed-matter physics. The concentration of intellectual activity here displays itself vividly in science: over 100 Nobel laureates in science; 45 active members of the National Academy of Sciences in bioscience alone; the highest concentration of science students and postdocs; and more Ph.D.’s granted in life science than in 48 states.

Better known than these academic assets is the enormous array of cultural and entertainment assets-a cross section of talent that intersects daily, not so much in the workplace as at the dinner table.

Of course, the ICE sector itself provides jobs. Indeed, the number of jobs in this sector is up 30 percent over the last 15 years. And they are high-quality jobs, requiring a high degree of expertise and training. But it is not as an engine of employment that ICE is key to the city’s future. Rather, ICE can keep FIRE from extinguishing by creating a different value premium for our city which, if properly nurtured and featured, increasingly can sustain it as a world capital. Our distinctive set of intellectual, cultural and educational assets draw people to New York, and have the power to anchor talented workers and creative jobs.

These assets will influence those who decide where to locate businesses. In turn, the ICE sector will attract and electrify a talented and knowledgeable work force to support their businesses. Even real estate will come to depend on ICE-on the desire of people to live here even when they don’t have to do business here, except as a voluntary choice. Large parts of FIRE will survive and thrive in New York, but only if the city maximizes its ICE-sector advantage.

So a strategy for the New York of the 21st century must focus on the ICE sector-on the life of the mind that makes New York an interpersonal magnet that cannot be replicated in cyberspace, on the creativity that will keep commerce and those who engage in it here, and on educational institutions as the idea generators that will yield path-breaking and profitable research. ICE not only promises advances in the sciences and the arts, but also provides the advantages that will keep people in New York and draw in new talent and new energy.

If the ICE sector is to succeed as an engine for New York’s future, civic and institutional leaders must embrace and nurture it. Our universities, cultural institutions, businesses and government will need to act more aggressively to develop a set of interlocking networks that better integrate us all and connect us to the life of the city, and we must work to create together a set of venues to magnify and harness the city’s creative energy.

In his noted poem, Robert Frost wrote, “Some say the world will end in fire / Some say in ice.” For New York, FIRE and ICE are not an ending, but a prescription. FIRE has sustained us for decades, and the addition of ICE can secure our future. We should welcome the days of ICE ahead of us.

John Sexton is the president of New York University. Abraham Lackman is the president of the Commission on Independent Colleges and Universities.