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Looking Forward Profile | Jon Metzler
LF50 | Berkeley lecturer Jon Metzler is looking forward to: the future of 'clusters', the Bay Area and innovation in Japan
Jon Metzler is an expert on not one but three topics that I’m interested in: clusters, Japan and the future of work. He’s also a fellow fan of the Bay Area, warts and all. He’s a lecturer at Berkeley Haas School of Business focusing on innovation, clustering and Japan, a former media entrepreneur (with a background å newspaper publisher in Japan) and an innovation consultant. The following is a loosely edited synthesis of a number of recent conversations we’ve had, framed as three things he’s looking forward to. - SJ
1. Clusters in a post-pandemic era
Stephen Johnston (SJ): You’re an expert in clustering and the future of work. The hybrid was a bombshell for both of those topics - what does the future world of work look like?
JM: I’m excited enough about the post-pandemic impact on clustering that I started a class about it! I launched a class (called Clusters: Locations, Ecosystems and Opportunity) in 2021 to explore the impact of the pandemic and increased remote or hybrid work on clustering.
I should give credit where it’s due. I was first exposed to clustering theory by one of my instructors, Andrew Isaacs, who is still faculty at the Haas School of Business. Drew was one of my advisors for my MBA/MA-Asian Studies thesis back in 2001. (Tom Gold, known for his research on Taiwan, was my chair, and Steve Vogel, known for his research on political economy in Japan, was also on the committee.) Drew was the one who exposed me to Michael Porter’s writings on clustering and to Annalee Saxenian’s Regional Advantage, which compared Silicon Valley and Boston Route 128. I applied the frameworks from Saxenian’s book to my own comparison of Silicon Valley and startup entrepreneurship in Japan in 2000-2001. That research and those frameworks then became the basis of my consulting practice, which I founded in 2008.
It was a student, Shashank Anantharam (Haas MBA 2022), who in spring 2021 (while we were still remote due to the pandemic) commented that “for an MBA instructor, you seem to believe in industrial policy”. That conversation with Shashank ultimately led to me to propose and launch a new class on Clusters in fall 2021.
The Class is centered around specific case study examples, such as Raleigh-Durham, Napa, Shenzhen, and, naturally, Silicon Valley. Generally, classes contain one or more of four themes: Stakeholders; Policy; Transitions and Turnarounds; and The New Work, which broadly describes our post-pandemic state of blurred work modalities.
It’s important to clearly define perspectives, and to be data-driven.
As an example, San Francisco lost about 3% of its nighttime population during the pandemic (and thankfully that’s started to turn around). That translates to around 25,000 people. Extrapolating from Nicholas Bloom’s research, we can estimate that maybe 70% of those stayed within the San Francisco economic sphere, and 30%, or around 7500, moved somewhere else. Whether that’s a lot of people or not many really depends on where you sit. If you are Bozeman or Bend or Asheville or Austin and suddenly 500 or 1000 emigres from Northern California show up, that has a big impact on the local economy. So I’m excited about this moment and its impacts, and what folks at Slack call Regionality of Work.
I do think some of this movement was shorter-term. For example, high net worth individuals who moved to Florida for income tax reasons (Florida is one of seven US states with no income tax). That had a lot to do with the economic environment in 2021 and 2022 and seems tactical in orientation. Will that sustain? Maybe. If they moved for reasons beyond taxes - such as ease of doing business, or getting permits, or maybe they like palm trees more than cool San Francisco breezes - then yes, that could be lasting. If it was purely for tax reasons, then we shall see.
Generally, though, the pandemic has proven to be an amplifier of whatever vector cities were already on. Austin and Salt Lake City were already growing, and that vector got amplified. The stresses and strains San Francisco already had were exacerbated.
2. The Bay Area’s future - despite, everything
SJ: You say you’re influenced by Saxenian’s 2001 book Regional Advantage that showed how Silicon Valley grew at Boston’s expense. In the past few years the pandemic, crime and high housing costs really do seem to have tarnished its image. Does SV still have what it takes?
JM: I’m bullish on the San Francisco Bay Area. Keep in mind I’m a resident of 24 years. This isn’t our first downturn. I recall seeing similar headlines in 2001 and 2002, and in 2009. There’s a long historic trend of incumbent residents leaving the Bay Area during good times, and those residents being replaced by the newly arrived or by immigrants. The immigration cycle and the move-to cycle was temporarily broken. The immigration cycle is being restored and the move-to cycle is a function of jobs and mobility. I do still think we need to make it easier for students who come to the States to stick around after graduation.
Data for Santa Clara and San Mateo Counties via Silicon Valley indicators
So long-term, I’m bullish, for the simple reason that the appeal of the Bay Area is the sheer amount of bright people and capital who are here, in a beautiful setting, in an area that has relatively open, welcoming culture. That’s certainly why we as a family have stayed.
It’s important to keep in mind that the Bay Area isn’t a monoculture. There’s tech, and there’s life sciences, and wine, and tourism. This is part of what defines an innovation cluster - the coexistence of two or more industries, and their spillovers.
With all that said, San Francisco is in a tough spot. Parts look particularly uninviting. There’s a set of longstanding problems that have been hidden under the veneer of San Francisco’s success that need dealing with, from homeless to affordability. But San Francisco has dealt with crises before. Getting commuters back in the city will solve a lot of problems. At the state level, there is great urgency about easing construction of new housing, and what’s referred to as Builder’s Remedy has lent immediacy and flexibility to adding housing capacity, such as through ADUs.
Broadly though, place matters (as both Enrico Moretti and Richard Florida would say), and in the presence of fluid labor, the intersection of place and culture and opportunity matter. San Francisco and the broader Bay Area offer a unique set of opportunities.
3. Japan’s innovation clusters
SJ: As someone who has long studied Japan, you were a fellow contributor to Joe Coughlin’s forthcoming book on longevity ecosystems. Can you share about how Japan does clusters? It has a reputation as not being very innovative compared to Silicon Valley but is that just poor marketing?
JM: A few shout-outs here - first, to Substack, since I first connected with the MIT AgeLab and Prof. Coughlin after writing about clustering in Japan! That led to my contributing a chapter on Japan for Prof. Coughlin’s upcoming book. Also a word of gratitude to my student Alan Chan (Haas MBA 2023), an entrepreneur who put us together. So Stephen, I guess you and I owe Prof Coughlin, Substack and Alan a debt of gratitude.
I teach on Clusters, and also teach on Business in Japan, and on Strategy for the Networked Economy. And, I’m living in the San Francisco Bay Area, not Japan. So I consciously applied those attributes in developing a chapter on longevity hubs in Japan. I took the arm’s length perspective that not being in Japan affords me in writing about it, and followed the framework I use in my own Clusters class, which is shown below, and also my research on Japan’s sharing economy versus that in the United States.
In Japan, you have the super-city at the center. More specifically, the four prefectures of Tokyo, Kanagawa, Chiba and Saitama and their combined gravitational pull. About 30% of the country’s population lives in those four prefectures. So I started from that centripetal force, to identify longevity hubs that were outside of Tokyo and had come into balance with the gravitational pull that greater Tokyo exerts. Following my own Clustering template, I looked for areas that were outperforming expectation, as measured by population growth. Meaning, Japan’s overall population is shrinking, and the decline in population is most visible ex-Tokyo. So if a town outside of Tokyo is growing in absolute terms, it is by definition out-performing expectations. For example, the national government is expecting smaller towns outside of Tokyo to shrink, which will force conversations about where to invest, and where to disinvest.
Growth coefficient of population 65 and above, relative to 2015, segmented by city size; Cabinet Office, 2019
I’m bullish on the role of sharing platforms as a way to unlock income in a country where part-time work is common.
Over the past several years, I’ve interviewed service providers and investors and suppliers participating in Japan’s sharing economy. Airbnb Japan graciously put me in touch with super hosts, one of whom was a very active retiree who was quite happy about how Airbnb was contributing to his post-retirement income. He’d been an expat internationally, and at a time when Japan was still figuring out its regulatory regime for sharing platforms, was helping educate his local ward office on how to handle the influx of inbound travelers. He ended up incorporating as an inn operator so he could host guests full-time. Those sorts of examples show how sharing platforms combined with motivated, active seniors can unlock income opportunities.
Ultimately I chose four locations for the upcoming chapter for Prof. Coughlin: Okinawa, Awaji, Kamakura, and Karuizawa. The common threads they share are some anchor institution, company or civic body at the center; quality of life; and transportation infrastructure that puts them in range of the super-city if need be. Okinawa, for example, hosts a new-ish research university, the Okinawa Institute of Science and Technology, which has injected 1350 or so staff and researchers into Okinawa’s local economy.
How Japan ages, and how towns outside of the super-city handle aging, will have lessons for all of us.
And I’m excited about Prof Coughlin’s upcoming book, and of course, all the other chapters, including yours, Stephen!