The Great Reset [Hardcover]

In the first chapter, Richard Florida explains that peaks and valleys are part of the lifecycle of any society as "obsolete and dysfunctional systems and practices" collapse, replaced by "the seeds of innovation and invention, of creativity and entrepreneurship." The First Great Reset occurred in the 1870s, the Second in the 1930s, and a Third is now developing. "The promise of the current Reset is the opportunity for a life made better not by ownership of real estate, appliances, cars, and all manner of material goods, but of greater flexibility and lower levels of debt, of more time with family and friends, greater promise of personal development, and access to more and better experiences. All organisms and all systems experience the cycles of life, death, and rebirth."

Literally, a reset means "to set again or renew" (Webster), "to set again or differently" (Oxford English Dictionary). As Florida makes crystal clear, however, a Reset is not an invitation to reload with the same "ammunition" (i.e. values, mindset, perspectives, strategies, and tactics) because, more often than not, that "ammunition" of the status quo helps to explain the emergence of a Great Reset in response to its inadequacies and thus is among its causes. This is precisely what Florida has in mind when observing that economic systems "do not exist in the abstract; they are embedded within the geographic fabric of the society - the way land is used, the locations of homes and businesses, the infrastructure that ties people, places, and commerce together. These factors combine to shape production, consumption, and innovation, and as they change, so do the basic engines of the economy. A reconfiguration of this economic landscape is the real distinguishing characteristic of a Great Reset."

Note: Eric Drexler has a great deal to say about these and other issues in Engines of Creation: The Coming Era of Nanotechnology (1987) as does Joel Mokyr in The Lever of Riches: Technological Creativity and Economic Progress (1992) and then in The Gifts of Athena: Historical Origins of the Knowledge Economy (2004). Presumably Florida shares my high regard for these three books.

Florida provides a wealth of information and analysis of the First and Great Resets, especially in terms of their impact on the economic landscape, first in the 1870s and then in the 1930s. For example, what was then characterized as "the war of currents" (i.e. competition between Edison and Westinghouse) revealed which system (alternate or direct current) was more efficient and would benefit the public most. "In that effort we can see a crystal-clear example of innovation progressing toward infrastructure that could become the foundation of a Great Reset." It did. Consider also led to great systems innovations in locations such as Edison's lab in New Jersey and clusters of innovation in Pittsburgh and Cleveland. There were also major advances in transportation infrastructure. Florida also notes other large-scale systems innovation in mass public education as well as in manufacturing that could fully harness the productive power of industrial capitalism.

With regard to the Second Great Reset, its impact was wider and deeper than its predecessor. "For starters, [it] saw massive improvements in economic efficiency. Advances in machinery and the introduction of the modern assembly lines generated huge economies of scale. Power generation improved, and companies got better at capturing and using what before had been wasted energy...Research and development expanded significantly during the Second Reset. Although many see it as an easy target during budget cutbacks, spending on research and development actually doubled over the course of the 1930s...The Second Reset bought about enormous upgrading and expansion of America's educational infrastructure. More and more Americans attended public school and more completed high school, with the percentage of high school graduates increasing from around 20 percent to more than 50 percent between 1920 and 1950." By the time the U.S. entered World War Two, the essential components of the Second Great Reset were in place.

The scope and depth of Florida's discussion of the current Reset are best revealed during a careful reading of his lively narrative. Suffice to say in this commentary that he makes a compelling case for recognizing, understanding, and then taking full advantage of the opportunities created by "new ways of living and working" that will drive "post-crash prosperity." Paradoxically, in this book ass well as in each of his previous books, Florida seems to be both a passionate idealist and world-class pragmatist. Consider the first two of six guiding principles that he proposes, based on his examination of past Resets, that can help the human race to move toward a more sustainable and prosperous future:

1. An abiding faith in a simple, undeniable first principle that "every single human being is [or can be] creative...The real key to economic growth lies in harnessing the full creative talents of every one of us."

2. "There's an urgent need to create new good jobs - lots of them...We need to support the growth of higher-paying knowledge, professional and creative jobs, and make sure that greater numbers of workers are prepared for them."

Having rigorously examined two Great Resets, Florida remains convinced that those who share his concerns as well as his convictions can, together, address urgent needs and thereby "see this Reset through and build a new prosperity." No more Band-Aid solutions. No more preoccupation with a problem's symptoms rather than with its root causes. "Let's stop confusing nostalgia with resolve. It's time to turn our efforts, as individuals, as governments, as a society, to putting pieces into place for a vibrant, prosperous future." Amen.

In my opinion, The Great Reset to be the most valuable book that Richard Florida has written...thus far.

This is an excellent follow up to Richard Florida (RF) first two seminal books. In the first The Rise of the Creative Class: And How It's Transforming Work, Leisure, Community and Everyday Life in 2003, he introduced the concept of the Creative Class. The greater the % of the creative class within a region, the more prosperous its economy. In the second book Who's Your City?: How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life in 2008, he introduced the concept of "megaregions" such as the New York, Boston, Washington DC corridor. Those regions have a high concentration of the creative class types. He rebutted The World Is Flat 3.0: A Brief History of the Twenty-first Century theory and stated the world is increasingly spikier as the creative talent is clustering in just the megaregions.

Here, RF leverages his concepts of the Creative Class and megaregions to develop an outlook for major cities. He states that the financial crisis will actually strengthen the two worldwide leading financial centers: London and New York. Historically, leading financial centers have lasted much longer than their nations' economic supremacy. London remains the preeminent financial center even though the U.K. has not been a dominant economy since before WWII. London and NY will rebound better than the second tier of financial centers such as Tokyo, Frankfurt, and Singapore. Leading financial centers have a widely diversified Creative Class and economies. They are strong in key postindustrial fields including the arts and culture. Thus, they remain magnets for creative types.

RF is upbeat about cities at the intersection of Government and capitalism. They are capitals such as Washington DC. They benefited from the financial crisis because the Government now controls a greater percentage of the economy. With more economic power, RF indicates that Washington DC has the most educated labor force in the U.S. and is also a thriving high tech center second nationwide only to San Jose.

College towns are also doing well as they have a high % of creative types. Their local employment is boosted by two thriving sectors: education and health care (university hospitals, med schools, and research). Often, college towns are also hi tech and start ups centers.

RF does not have much hope for Detroit. Detroit has experienced a depression for decades. The average home price in Detroit is lower than the average price of a new car. Its unemployment rate is 27%. But, in October 2009 Mayor Dave Bing stated it is closer to 50% if you count the discouraged workers not counted. Detroit has 62,000 vacant lots and buildings. Total vacant land is almost the size of Boston. Detroit is a post apocalyptic town. Its main hope is to keep on shrinking by abandoning vacant urban space back to nature. Wild life is getting a stronghold in such abandoned areas.

RF is also concerned about many formerly thriving Sunbelt cities. Those include Phoenix, Las Vegas, and cities in Florida. They experienced unsustainable growth as their housing sector bubbled the most. Home prices as a multiple of income became too high. And, the real estate and construction sectors represented between 25% to 40% of their respective economies. They ended up with excess supply of real estate. Now, many properties are in foreclosure. By April 2009, both Las Vegas and Phoenix home prices dropped by more than 50% since their peak. In Miami and Tampa they dropped by 40%. Among the top ten cities for the concentration of homes underwater (current value below purchase price), the vast majority were in Nevada, Arizona, California, and Florida. And, their local economies are experiencing a downward spiral. As real estate and construction have crashed, those cities are plagued with high unemployment rate.

After this crisis, the finance sector is shrinking as a share of GDP. The brightest young minds are now redirecting from finance to other sectors. Between 2008 and 2009, Harvard graduates have shifted away from finance (11.5% of graduates vs 23% in 2008). And, they are increasingly going into education (rose from 10% to 15%) and health care (rose from 6% to 12%). This is a good thing as the Creative Class excessive concentration in finance lead to diminishing returns for society. We don't need new CDOs structures. We need the next IPad.

In this post-crisis thrifty era, RF sees a seminal shift in lifestyle. The younger generations want to lead more environmentally friendly and flexible lifestyle. Consumers spend less on real estate and cars. SUVs are out. Zipcar and public transportation are in. Mcmansions in the suburb are out. Loft apartments walking distance to work are in. Consumer status symbols are shifting to green products. People buying a Toyota Prius do it more for the social status than the actual savings.

RF thinks the next shift in consumer spending will accelerate the integration of suburbs into megaregions. He refers back to his work in "Who's Your City" and mentions that taken together, the world's 40 largest megaregions account for 2/3d of the world GDP, 85% of technological innovation, while housing just 18% of the World's population. Megaregions expand and intensify our use of space. Suburbs are transformed into higher density mixed used space with modern working campuses proximate to residential areas.

Hub cities within those megaregions often prevail for centuries because of faster "urban metabolism." The rate of innovation, patent activity, and GDP accelerate as a city size increases. This is because of the network effect. Clusters of highly skilled people trigger faster idea generation and implementation.

RF feels that high speed train is a key component in the advent of megaregions. Such trains reduce distance in time by a factor of three or more vs driving. New commuting patterns between far flung cities can emerge.

RF thinks the social benefits of home-ownership are way overblown. U.S. social policy with tax benefits and subsidies supporting home-ownership have caused us to over-invest in homes at the cost of investing in R&D and other more productive areas. We need mobility and flexibility so people can relocate where opportunities are. Home-ownership stifles such flexibility. He feels home-ownership is way too subsidized vs renting. According to the CBO, the federal government provided $230 billion in home ownership subsidies in 2009 vs only $60 billion for renters. It is time to revise this imbalance.

He feels U.S. mortgage finance practices cause unstable real estate markets with bubbles and crashes. This is because they encourage homeowners to borrow irresponsibly. In the U.S., one can buy a home with very little down, the entire interest is tax deductible, and if a home falls in price, one can just turn the key to the lender with no penalty. RF who lives in Toronto, Canada states that none of that is done in Canada. In tandem with higher bank capital requirements, Canadian regulations caused its real estate markets and banking sector to weather the worldwide financial crisis pretty much unscathed.

PROS:
* Easy-to-read writing style that also communicates a lot of information.
* Presents historical information and research that helps give a sense of the big picture and justify the theses of the book.
* Covers a lot of ground and speaks to people's interests.
* Provides a lot of useful insights.
* Stays positive without pulling punches.

CONS:
* Covers so many broad topics depth is occasionally missing.
* The broadness of topics makes the usefulness of information unpredictable from person to person.

SUMMARY: A must-read book on the future of the global economy after the crash of the late 2000's.

Before I read this book, I hadn't read any of Richard Florida's other works for two reasons. First, his basic ideas seemed to be ones I pretty much agreed with in general, and secondly I got a lot out of his blog and other writing. However, come the Great Recession, and seeing a lot changes on the horizon, I felt The Great Reset was definitely worth a read.

The Great Reset is about After the Great Recession. Florida isn't talking recovery (which I approve of), but instead of the changes that are coming in the wake of the Great Recession. He looks at how we lived and will live, how we worked and will work, what changes are coming, and what changes will be needed.

If that sounds a bit heavy, the book actually is extremely readable. You don't need to be an economist or sociologist to get anything out of it, you just need to pay attention.

Florida's basic theory is that economies go through Resets - periods where things break down and re-organize because of system failure and systems that don't keep up with changes. Our Great Recession, the Great Depression, and the Depression of 1870/Long Depression, are all examples of Resets. So, by looking at the past, he says, we can get some idea of what we face in the future.

Florida goes over these and other Resets in some detail, pointing out why problems happened, but also how they heradled change, often radical change, in employment, government, and economics. In many cases he notes the resets, as painful as they are, often lead to new booms and prosperity. However, one has to be aware of the changes that are coming in order to benefit.

Having establishes his idea of Resets, he then goes and looks at how things changed after these periods. The rise of industrialization, shifts away from agriculture, changes in industry, etc. are discussed, and helps bring out his point that these resets mean massive change. It's actually amazing when one looks back on some 140 years and realizes just how much change has happened.

Finally, having looked at historical Resets, Florida asks what happens after the one we're living through now - and what we have to face. A quick summary:

* Megaregions are the future - areas like Silicon Valley, Greater Toronto Area, Washington-Baltimore-Boston, etc. The future, to him, are highly integrated areas - and mostly areas that are already established.
* The future will be more mobility and less cars and homes. He points out that the enthusiasm for the car-and-house lifestyle isn't sustainable and frankly led to our current problems.
* Careers will become more and more creatively-oriented.
* Public transport, better education, and even job programs will be needed at the federal levels to have society adapt to the Great Reset. Local, state, and city governments will be the most likely sources of attracting business and local remodeling.
* Don't expect immediate change. It may take decades for the Reset to happen, and it won't bepleasant for some people.

I can't do justice to the book, but he gives a lot of good ideas and a lot of food for thought.

The book isn't perfect -it's a Big Idea book, so at times it focuses on breadth over depth, though extensive footnotes proice a wealth of reading material. It's meant to be big picture, so expect at times to find less information than you wanted.

However, that flaw aside, I found it an excellent book. It's someone trying to communicate the future and what we can learn from the past, and giving you a lot to think about and build on.

I'm putting this book in the must-read category. It's one of the few sources of information I've seen that gives enough of a big picture of the future you can get some practical ideas out of it, as well as getting a better sense of how we got into this mess.

However, I won't put it in the must buy category for the simple reason that for some people the book will be a one-time read. Some may re-read it several times, others are just going to get everything they can in one go. It depends on who you are (and you probably know where you fit in by reading this review).

So my recommendation is to read it one way or another: just decide if it'll be out of the library, a book you buy, or a book you buy then give to someone else.