I was on a panel with a few other VCs at the Columbia Private Equity Conference last week, and we were asked if we had a hard time recruiting entrepreneurs and executives to work in New York City. I had the benefit of going last, which is always my favorite place to be on panels, and I was trying to come up with something snarky to add beyond that New York is the greatest city in the world. As I sat there I was wondering why it was easier to recruit people now than it was 10 or 20 years ago, and on the stage I stumbled upon the seed of an idea that I put together in a little more detail below.
As a quick aside, one of the “tricks” I have observed about Macroeconomics is that it works best when analyzing events that have already happened. On a forward looking basis I have found that it is nearly impossible to use Macro tools to predict events, unless the trend is completely obvious. More often than not people are in the right place at the right time and become lucky (or unlucky). For instance, using Macroeconomics to predict the overthrow of the Egyptian government would have been impossible. But if you look at the chain of events in hindsight you see some links: Russia had an usually hot summer, which was coupled with drought. This caused the failure of Russia’s wheat crop. Russia is the world’s largest exporter of wheat, whereas Egypt is the world’s largest wheat importer. As a result of supply and demand, the cost of bread went up by 300% in Egypt. The last time this happened was in 2008 and back then the government was almost toppled. This time the civilians succeeded. QED.
New York City is also the beneficiary of a long term macroeconomic trend, albeit of a different variety. I will blur the generational lines a little bit, but there is a fact that Americans born in the 1970s and 1980s are waiting longer to get married. They are also waiting longer to have children. As a result, I find a lot of people in their mid-30s are single and have reached middle management quickly. I am going to swerve off into some non-HR-friendly stats for a minute, but this cohort has two features which make them particularly appealing to start-up companies: 1.) they work longer hours according to the US Dept of Labor and 2.) they spend less time commuting to a family in the suburbs.
Most importantly for my argument above, this cohort is portable. They can move anywhere. This trend is happening for the first time in the history of the US.
Recruiting is easy from this point forward – all I have to do is sell the benefits of living in NYC versus some nameless, faceless office park in Silicon Valley (which is typically where I have to cross-rush for good executives). If you are a single person in your thirties wouldn’t you rather work and live in a city where you are surrounded by a million other single people in their thirties? And then you have the nightlife, restaurants, shopping, etc. It is a slam dunk.
Over the last two years I have recruited a dozen senior managers from across the US into my companies in NY. I have never had such an easy time.
Long story short, in hindsight there is a macro trend that is going to make it much easier to build big businesses in urban settings like NYC. Incidentally, you see the same trend in California for companies moving from the peninsula into SF proper. As a NY VC I am a major beneficiary of this trend. It is also going to the make the city a much better place to live in the years ahead, and I see no signs of this reversing anytime soon.