I live seven miles from Venice Beach. While there are still many eccentric people walking along the beach paths, the area is gentrifying as leading Internet Startups take root. The New York Times has written a great piece about Snap and its upcoming IPO that will mint many new super-rich people.
As an environmental and urban economist, permit me to pose a riddle for you. Why have these “hot startups” located near the beach? Is there anything inherently productive about being in the sunshine in 75 degree warmth in winter with blue skies and clean air and close to the beach? No! Milton Friedman said that the cold winter in Chicago helped the University of Chicago because the nasty weather conditions meant that there was nothing else to do but work!
As I have argued many times, in this footloose age, areas with great quality of life attract the skilled who create their vibrant companies and then the job centers follow. Quality of life anchors the skilled city. Once you attract a density of the skilled , then the cool restaurants and micro breweries cluster nearby and the process feeds on itself.
Shanghai's leaders are aware of this dynamic. Now, the usual question focuses on gentrification. While the NY Times article celebrates the dynamic now playing out in Venice, as rents soar the New York Times will write another piece saying that the area “is going to hell”.
For some of my writing on this broad topic take a look at;
Siqi Zheng & Matthew E. Kahn, 2013. “,” Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(1), pages 1-28, 03.