I recently spoke at a conference called the New York Forum, where a rich mixture of current and up and coming business leaders and policymakers from around the world discussed obstacles to global growth and development. My panel dealt with geography. We asked, “Does location matter for economic opportunity? Is the economic world flat, as some have argued, or is it ‘spiky’ in ways that will continue to attract investors and ambitious, creative entrepreneurs to some places rather than others?”
My initial thought was that from an investor’s perspective, a company’s location reveals little about its investment value. After reviewing historical data covering both developed and emerging markets from 1900 to the most recent business cycle, I was convinced that knowing how fast a country’s economy has been growing will tell me nothing about how much money investors made from its stock market. Investors seem to face a flat world.
Upon further reflection, however, I modified my view. Successful companies and their investors continually look for the next growth spike and figure out how to profit from it. Simply put, future growth rewards entrepreneurs and their financial backers. Past growth does not.
How do we find these future growth spikes? Some will sprout from natural endowments, such as deep-water harbors or deposits of valuable natural resources. Natural endowments, however, don’t necessarily lead to ongoing prosperity. The spikes that really soar are the ones that attract creative, ambitious people who, in turn, attract more such people who collectively generate the wealth and opportunity that continues the process. The results of this process can lead to prosperity in ways that early-arrivers didn’t even anticipate or may have resisted.
Think about the cities you know best. The successful ones continue to attract a diverse population in which talented people find themselves in close proximity to other talented people. The cities and nations that languish are the ones who can’t maintain that attraction.
What about the U.S. as a global spike? Beyond our natural endowments, I believe that it has been our ability to educate our citizens—as well as people arriving here from around the world—while providing the means to communicate and create, that have been crucial to our prosperity. If I’m right about that, we have to find ways to keep our borders open to talented, ambitious people and to educate those who can keep pushing that spike upward.