Danny Crichton joins Brian Anderson to discuss the importance of the New York tech industry, the effects of Covid-19 on its future, and the geopolitical importance of American innovation.
Audio Transcript
Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on today's show is Danny Crichton, the managing editor of TechCrunch. Danny's been a foreign correspondent and Fulbright scholar. And so as well as a venture capitalist in Boston and Palo Alto. These days, he's living in Brooklyn, covering technology, power, and startups for TechCrunch. His recent article in City Journal’s, New York City Reborn issue "Keep New York Tech Strong" notes that New York City is perhaps the world's most technologically driven urban economy. And he charts a strategy for the cities would be leaders to keep it that way. Danny, thanks very much for joining us.
Danny Crichton: Brian, thank you so much for hosting.
Brian Anderson: New York as you note in this essay, is the hub of a number of major industries, finance, healthcare, media, the arts. But you're right, the technology is in many ways, the foundation for the city supremacy in these areas.
And of course, as you also note in this essay, technology and the tech industry was one of the few to really come through the pandemic in pretty decent shape in the city. And it was a benefit to the city during this awful period. I was wondering if you could elaborate a little bit on just what the tech economy looks like in New York and how it does kind of provide the foundation for these other major industrial sectors of the city's economy. People don't always think of New York City as a tech hub, but it really has become one.
Danny Crichton: I think that's absolutely right, Brian. I mean, when you think of New York City, I think of tourism, right? You think of Broadway, you think of the museums, you think of the arts and the culture, and the restaurants. But the reality is the foundation of New York's economy today, New York City's economy, is the technology industry. And that comes in a couple of different flavors. I mean, there's obviously tech as in Google, Facebook, and the big technology companies we all know and heard about. It also comes in the flavor of startups, prominent startups, like Peloton and others who have really driven New York City as a startup hub. But then technology is also the key to finance, hedge funds, quantitative trading funds, Goldman Sachs itself, are engineered through software and hardware products to build out their resources. And then in media, advertising networks today are no longer. People buying and trading ad space using a phone, it's all programmatic online. So no matter what kind of major vertical we're talking about in New York City, technology is oftentimes the foundation for the success of those verticals.
Brian Anderson: Now we have of course, a big mayoral race coming up. It's underway. A big election coming up. You argue that the city's next mayor should really target a way to retain major tech companies in the city and to attract new ones. In your view, what kind mayoral agenda should be pursued to accomplish that? And what is it that the tech economy is looking for? What would draw people here and keep the companies that are here in the city?
Danny Crichton: I think what makes New York unique is, it doesn't have a lot of prominent technology companies, right? When we think of Google, Facebook, Microsoft, I mean, they're all on the West coast, San Francisco, Palo Alto, Mountain View, Seattle in the case of Microsoft. And so New York is in this weird space where it is a huge market and ecosystem. There are hundreds of thousands of software engineers and folks in the tech industry locally, but in many cases, they're in satellite offices. Google has more than 10,000 employees in New York City. Facebook is growing very rapidly. Amazon notoriously tried to expand quite rapidly in New York City and fail due to some politics at Albany and in city council. But New York is always a choice for a lot of these companies. And so first and foremost, quality of life remains absolutely critical.
The tech industry, unlike many of the others, we talked about healthcare, or arts and cultures, or restaurants, or Broadway, really can work from everywhere as we've seen in the COVID-19 pandemic. And so whether you're a software engineer, whether you work in sales, or marketing, or any of the other roles that startups and tech companies offer, you literally can do them almost anywhere. So we've seen a huge surge of folks leaving the city, going to places like Miami, the Midwest, Colorado, Texas, overseas. And so I think for the next mayor coming in just a couple of months, they're really going to have to make the city attractive to these folks to come back to the city. People who may have made their lives five, 10 years and decided to ride out the pandemic somewhere else. That's step one.
Two, I think we've seen this in the last eight years in the de Blasio administration. There's just been very cold ice between the business world and the political world. It's not the Bloomberg administration for sure. And so I think for the next mayor reaching out, rebuilding, and rekindling those partnerships is going to be critical. Because ultimately again, a lot of the tech industry is not headquartered in New York. So a lot of the CEOs are not in New York. A lot of the senior execs are not necessarily located in New York. And that means that we're in competition with folks like Francis Suarez, the mayor of Miami, who is outreaching to these folks all the time, is doing everything he can to bring jobs and the high incomes that the tech industry offers to Miami. And so I think the next mayor absolutely needs to double down and realize that yes, New York City in at least in my view is one of the greatest cities in the world, but that isn't enough necessarily to draw the best talent here anymore.
Brian Anderson: But what, from a more specific policy standpoint is the tech industry looking for in the city? Is it a friendly tax environment? Is it keeping the city streets safe? Is it more housing options? What is it more concretely, that they're looking for?
Danny Crichton: I think it's actually all of the above. I mean, first of all, quality of life is huge. Because of the mobility of the tech workforce, people can live anywhere. And so for the young folks, they obviously want a lot of entertainment options, better nightlife, which has been a concern in New York City for quite some time. But then as those early workers mature and become more experienced executives, you get into quality of life issues around education, housing prices, not only in New York City proper, but in the Metro area. Access to amenities for families, whether it's better parks or better transportation options. And so, in many ways the interest of the tech industry aligned quite closely with those broadly within the public. Beyond that, I think there's two fold. One, is the city really needs to double down on startups. There's a lot of venture capital money here, but you just don't see the connections between different industries, different startup accelerators, and foundations, all coming together in a way that I think New York could really do.
And I think the next mayor could absolutely do more to connect the dots between, think of an area like biotech. We have some of the best hospitals. We actually have some of the best pharmaceutical companies, either in New York City proper or in New Jersey. We actually have a lot of biotech engineers here. They actually don't collaborate all that much, believe it or not. And I think there's a huge opportunity to play kind of a bridging role between a lot of these different communities locally.
And then the second is obviously, I do think taxes is important. We saw in the last week that the state Capitol has voted to increase taxes on the wealthiest taxpayers. And the irony of course, is that the wealthiest taxpayers oftentimes are either in finance or technology in highly flexible workplaces where they can live anywhere. They can pay taxes in any state they want. And so I think, for the next mayor and later on the next governor, you have to double down and ask, how do we make New York City affordable while still offering that quality of life that people enjoy?
Brian Anderson: I don't know how closely you're following the mayoral competition, but are there any candidates in your view who seem better on these fronts than others? And how has the tech industry in the city looking at the mayoral race? Do they have a favorite?
Danny Crichton: I don't think there's been much of a favorite. Right? So I mean, one of the interesting things, I think there's what? Two dozen candidates now for mayor. And you'd be hard pressed to find any of them who talk about the technology industry at all, which is exceptional when you think about the growth, the economic dynamism here, how many jobs are coming into the market on this front. There just hasn't been a lot of outreach. Now that said, I do think two candidates obviously would be top of mind for a lot of folks in the tech industry. The first is obviously Andrew Yang, who has sort of built his whole bread and butter around universal basic income, of driving more dollars and a simpler sort of social welfare policy. And who's used social media very, very effectively. And he's well-known in Silicon Valley.
He's oftentimes fundraised very heavily in the Valley kind of political fundraising circles. And so he's of very top of mine, I think for a lot of the tech folks. Among the more I would call them traditional candidates, obviously Ray McGuire, the former vice chairman at Citigroup. In his position, he had to sort of run through a lot of the challenges of technology change at Citigroup. No place in the world has had more dynamicism and change from technology than the finance industry, going from literally decades ago, paper. But in more recent times, going from a world of having basic data to algorithmic trading, ever more faster trading options, having to deal with risk and compliance in the aftermath of the 2008 financial crisis. And so I think for him, he would be both not only the business leader who a lot of folks would love to see in office, but also someone who really understands the tech perspective and how important is to the success of the city.
Brian Anderson: Last summer, you wrote another very interesting essay for the print magazine of City Journal called "Venture Capital's Red Flags." This wasn't about New York so much. You noted there the growing influence of Chinese investment in American startups in the context of what is an intensifying global competition for tech supremacy between the US and China. I wonder if the seemingly local consideration of New York's tech sector is geo-politically relevant in this sense, is there overlap between those two stories you've written? And will tech companies seek greener pastures if they do continue to face an unfriendly environment, not just in New York, but American cities broadly?
Danny Crichton: I think the dynamism of the American tech industry is critical to geopolitics. I mean, ironically, it's one of those things where having good technology, really strong companies globally, is the key to American foreign policy in many ways. And what's beautiful is there's actually quite an alignment. There are small issues in which that can conflict, but in general is strong business environment with companies building US products with US jobs is going to put the US in the best position to negotiate in any context. And so there isn't as much competition. What I would say is what gets most interesting, I think is around finance. I think if you looked at the next 10 years, FinTech is going to be one of the greatest. Within FinTech, crypto, and blockchain also fits into that context. But finance is really going to be one of the great arenas of great power competition in the tech industry over the next 10 years.
You're seeing this both on the banking side where there's a lot of change underway just in the last year or two with Brexit leaving, London, and Amsterdam, and Frankfurt are all competing to kind of win over European trade volumes. In Asia, you see a divide now that Hong Kong has been closed off essentially to HUD of foreign investors, or at least a lot of foreign investors are fretting about investing their money in Hong Kong. And so there's just a lot of dynamic change. And New York, obviously being both a financial hub and a tech hub is at the center and confluence of those two trend. So to me, in competing with China, obviously a lot of the headlines focused on semiconductors. Today, as we're recording, there's a summit at the white house, which Bloomberg sort of described as a grousing summit to complain about the lack of chips, which is obviously the top of mind issue in US, China relations.
But to me, the one to pay attention to is actually finance. The publication of that article has actually massively clamped down on FinTech in just the last two or three months. I believe today, over the weekend, China announced that they were going to fine Alibaba, one of the largest tech companies in China, $2.8 billion for antitrust concerns. And just this morning, they announced that Ant Group, one of the most successful and prominent FinTech companies in China, is actually going to come under state control. It's going to be regulated directly by the state. And it's going to be sort of, I don't even know how to kind of describe it because there's no good language I think, in the US context, but it sort of be like a regulated state enterprise, public private partnership. There's just a lot of words you're going to have to use there.
So to me, this is the frontier. Does the US dollar remain the reserve currency? Does the fed maintain kind of its power over the economy? Does blockchain and China's use of a digital currency compete ultimately with the strength of New York's financial ecosystem? That's what I would be paying attention to in the next couple years.
Brian Anderson: And speaking of that financial ecosystem in New York, what is your view of the near term future Wall Street? Do you see further disintermediation of the industry with companies? We've had several prominent financial firms in the city leave New York, or at least set up major offices and other American locales. People have assumed that Wall Street is kind of invulnerable, that it's always going to be there, but you can imagine a future in which it's much diminished in the city. Right?
Danny Crichton: Well, I think it's really at a crossroads. There's some skepticism about the future. Because look, the finance industry has survived centuries of crises, and depressions, and war pestilence, whatever the case may be in New York City's history. So rightfully so I think a lot of folks think of it as an invulnerable. It survived three, 400 years of history. Nonetheless, the number of threats against Wall Street today from so many different fronts, I think is unprecedented. So if you had to list them off FinTech companies, mostly based out of San Francisco companies like Stripe, Plaid, Coinbase are increasingly taking trading volumes, and payments volumes, and banking away from Wall Street over into the technology world in Silicon Valley. On top of that, you have a bunch of issues around wealth management as people move their money out of New York City to more tax friendly jurisdictions. You have the kind of global change going on as I just mentioned, around London, and Brexit, and Hong Kong, where cities like Seoul, cities like Amsterdam are suddenly showing up on sort of the radar screen in a way that they haven't before.
And then there's the business of banking itself, which is increasingly changing from a relationship driven business to a technology trading business. And so the classic kind of investment banker is really under threat. I mean, one of my close friends, who's been an investment banker six to eight years, she spends a lot of her time learning how to code in her career. Because that's the future for a lot of these banks. And so to me, the key for New York City is to realize that it shouldn't take it for granted that there could be huge changes. And as you know Brian, finance powers much of the budget for government in New York, both at the city and state levels. It's by far in terms of industries, one of the largest taxpayers in the state. It really subsidizes most of the services we take for granted. And so we shouldn't think of it as invulnerable, we really need to protect it. And it needs to stay local if we're going to be successful long-term.
Brian Anderson: Thanks very much, Danny. Don't forget to check out Danny Crichton's work on the City Journal website, it's www.city-journal.org. We'll link to his author page in the description. You can also find City Journal on Twitter @cityjournal and on Instagram @cityjournal_mi. And as always, if you like what you hear on the podcast, please give us a ratings on iTunes and check out Danny Crichton's work as well on the great website TechCrunch. Dan, as always thanks very much for the intelligent comments.
Danny Crichton: Thank you, Brian.
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