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.

As we think about the "crash" of 2008-2009 and the lessons and parallels to be drawn from it the title of Prof. Florida's book promises a broader perspective on what the next stage in the US economy might be. The overarching consequences of this would appear to be the need for a deleveraging of all sectors of the economy: consumer, business and government and one would hope that a book with this title would address these issues head on. Not so. What we get here is a thin volume long on broad generalizations mostly tainted with the political correctness of academia. It reads like exactly what it is: a puffed up version of a popular article the author wrote for The Atlantic. We find in here one somewhat original premise: that depressions stimulate creativity leading to what Florida terms "resets". He cites the depressions of the 1870's and 1930's as examples but this is only explored in a very superficial manner.
Reading this it is hard not to be reminded of the old adage that: "if your only tool is a hammer, everything looks like a nail." Florida is an "urban planner" by trade so he is easily distracted by notions of "economic geography". His risible assessment of Detroit's problems, for example, centers on its lack of urban density relative to other urban areas in that part of the country. For the most part he fails to explore (or even indicate an awareness) of the destructive influence of government with two notable exceptions. First, he does state in general terms that there should be less "top down" planning and more local control. He also seems to advocate less zoning and more flexible land use. Towards the end of chapter twelve (which also included the nonsense about Detroit) Prof. Florida treats us to the insight that "luring so-called big game projects" does not work and that "{r}evitalizing older cities ... increasingly depends on ... lots of smaller activities, groups, and projects....{and} local entrepreneurship." This is a very valid point but he fails to develop it in any meaningful way - probably because he cannot find a role for an urban planner in this approach. Florida's second argument against government policy is his strong argument that government should phase out its subsidy of home ownership and he briefly condemns the irresponsible behavior of defaulting homeowners as something enabled by public policy; it's a fair point and one that should have been developed in more detail.
So we have a small book that is long on generalizations that offers up an occasional worthwhile insight only to move on to more clichés along the lines that urban density is good, suburban development is bad; we should travel less but be more mobile and so on. As for travel, one of the few times Prof. Florida does get specific is when he devotes a full seven page chapter to the virtues of bullet trains with only the briefest acknowledgement of their appallingly poor economics. For an example of a fact based discussion of this topic see (among others) [...].
In short, this book won't take long to read but it probably is not worth your time. If you are looking for a sweeping analysis of the current economic and social turning point (if that is what we are in) you will have to look elsewhere. I wish I could recommend some single volume that address this well but I have not yet found one. If you are interested in what a new approach to urban decay might be I recommend that you check out a little video featuring Drew Carey who would like to help save his home town of Cleveland: [...].