Why Cities Exist

Summary

The video explores the correlation between urbanization and wealth, highlighting the high urbanization rates in the world's richest countries and lower rates in the poorest. It delves into the historical shift from hunter-gatherer societies to farming, which enabled the development of cities. The script explains how surplus food from farming allowed for non-agricultural jobs, leading to advancements in various fields. Cities are portrayed as natural outcomes of human settlement, with their sizes often following a predictable distribution. The video also discusses the economic advantages of cities, such as business clustering and labor specialization, and how these contribute to efficiency and wealth creation.

Takeaways

• 🌍 The richest countries tend to have a high percentage of urban population, suggesting a correlation between urbanization and wealth.
• 🏙️ Urbanization levels are notably low in some of the poorest countries, indicating a potential link between poverty and lower urban concentrations.
• 🏡 The evolution from hunter-gatherer societies to agricultural ones enabled the establishment of permanent settlements, which eventually led to the formation of cities.
• 🌾 The surplus of food due to advancements in farming technology allowed for the development of non-agricultural jobs, which in turn spurred the growth of cities.
• 🌱 The natural progression of human settlement patterns has led to the formation of cities, which have remained relatively consistent in rank over time.
• 🔑 The size and ranking of cities often follow a predictable distribution, similar to that seen in nature with word frequency or income distribution.
• 🏢 Businesses cluster in cities to tap into a shared labor pool and to be near other businesses for collaboration and efficiency.
• 🚗 Some industries, like car manufacturing, do not benefit from being in cities due to high land costs and other disadvantages.
• 📦 Cities facilitate efficient distribution and access to goods and services, which is crucial for economic growth and development.
• ⚖️ The division and specialization of labor are key drivers of efficiency and wealth creation, which cities help to optimize by bringing people with different skills together.

Q & A

What is the correlation mentioned between wealth and urbanization in the video?

The video suggests a direct correlation between wealth and urbanization, where the richest countries have a high percentage of their population living in cities, while the poorest countries have lower urbanization levels.

Why did humans initially settle in one place around 10,000 BC?

Humans settled in one place around 10,000 BC due to the domestication of plants, which allowed them to farm and establish a long-term home.

How did technological advancements in farming change human society?

Technological advancements in farming allowed each individual to produce more food, freeing some people from farming duties to engage in other jobs, which led to the development of languages, literature, science, and technological advancements.

What is the significance of 54% of the world population living in cities?

The fact that 54% of the world population now lives in cities is significant because it represents a major shift from historical norms, where only half that percentage lived in cities 55 years ago.

Why do cities tend to maintain their historical rank in terms of population size?

Cities tend to maintain their historical rank due to a natural selection process where billions of humans make decisions on where to live, often choosing the best places, which historically have been large cities.

How does the distribution of city sizes relate to other natural phenomena?

The distribution of city sizes follows a similar pattern to the frequency of word usage in books, income distribution among people in a stadium, and the frequency of dolphin sounds, suggesting that cities are a natural human formation.

What are some advantages of businesses locating near each other in cities?

Businesses locating near each other in cities can benefit from a common labor pool, easy access to other businesses, and the ability to collaborate more easily, leading to increased efficiency.

Why might certain businesses not be located in cities despite the benefits?

Certain businesses, like car manufacturing plants, might not be located in cities due to high land costs and other disadvantages that outweigh the benefits of being in an urban area.

How does the concept of division and specialization of labor contribute to the efficiency of cities?

The division and specialization of labor allow individuals to focus on what they are good at, leading to more efficient production and trade, which in turn makes cities more efficient places to live and work.

What is the role of efficiency in the creation of wealth and cities?

Efficiency plays a crucial role in the creation of wealth and cities because it allows for the optimization of resources and labor, leading to increased productivity and wealth generation, which in turn attracts people to cities.

Outlines

00:00

🏙️ Urbanization and Wealth Distribution

This paragraph explores the correlation between urbanization and wealth distribution, comparing the richest and poorest countries. Rich countries like Qatar, Luxembourg, and Singapore have high urbanization levels, while poorer countries such as the Central African Republic and Burundi have low levels of urbanization. Despite the challenges of city living, including higher costs and worse air quality, more people continue to move to cities, which in turn fosters economic growth.

05:00

📏 City Size Distribution and the Zipf's Law

This section discusses the natural distribution of city sizes, particularly how they follow a predictable pattern known as Zipf's Law, where the second-largest city is roughly half the size of the largest city, the third a third of the largest, and so on. The pattern holds not just in the US but globally, including countries like Germany. This phenomenon also occurs in unrelated areas such as word frequency in books and dolphin sounds, supporting the idea that cities form naturally as a result of human behavior.

10:04

🏗️ The Role of Cities in Economic Development

The paragraph examines why cities exist and the advantages they offer for businesses and individuals. Cities create economic efficiency by clustering industries and talent, reducing costs, and fostering innovation. The example of Dusseldorf is used to illustrate how businesses, such as telecommunications companies, benefit from being close to competitors and collaborators. However, this efficiency has limits, as evidenced by the decline of Detroit when car manufacturers left due to rising costs.

Keywords

💡Urbanization

Urbanization refers to the process where an increasing percentage of a population lives in cities and urban areas. In the video, it's highlighted how more than 54% of the world population now lives in cities, which is a significant increase from 55 years ago when only half that amount lived a city life. This concept is central to understanding the correlation between city living and wealth, as well as how urbanization has transformed human civilization over time.

💡Correlation between Wealth and Urbanization

The video emphasizes a clear correlation between wealth and urbanization, demonstrating that richer countries tend to have higher urbanization rates. For example, Qatar, Luxembourg, and Singapore, the richest countries, have over 90% of their population living in cities, while the poorest countries like the Central African Republic have much lower urbanization levels. This correlation suggests that cities are often hubs of economic activity and opportunity.

💡Surplus of Food

The surplus of food refers to the point in history when farming became efficient enough that a single person could produce more food than they needed. This allowed other individuals to pursue different jobs and professions, leading to the formation of cities and specialization in labor. This development was crucial for human civilization, as it enabled the growth of cities, technology, science, and culture.

💡Specialization of Labor

Specialization of labor is the concept where individuals focus on a specific task or job rather than being self-sufficient in all activities. As farming became more efficient, fewer people needed to work in agriculture, allowing others to specialize in areas like literature, science, and craftsmanship. This specialization drove the development of cities and led to technological advancements, making societies more productive and efficient.

💡Zipf's Law

Zipf's Law is a statistical distribution where the size of an element is inversely proportional to its rank in a frequency table. The video applies this law to city populations, showing that the size of cities tends to follow a predictable pattern. For instance, the second-largest city is approximately half the size of the largest city, the third is about a third the size, and so on. This law demonstrates that the distribution of city sizes is not random but follows a natural pattern.

💡Natural Selection in Urban Settlement

The concept of natural selection in urban settlement suggests that humans tend to congregate in the most optimal locations over time. As people individually choose where to live, they naturally gravitate towards areas with the most advantages, such as job opportunities, resources, and social networks. This process results in the formation and growth of cities, which are seen as the most efficient living arrangements.

💡Efficiency of Cities

Cities are described as efficient in the video because they allow for easy access to jobs, goods, services, and social interactions. This efficiency stems from the proximity of different businesses, industries, and a concentrated labor pool, which reduces costs, enhances productivity, and fosters innovation. The video suggests that the efficiency of cities is a significant reason why humans naturally form into urban areas.

💡Decline of Cities

The decline of cities occurs when their primary economic advantages diminish. The video uses Detroit as an example, which experienced a decline when automobile manufacturers moved their plants out of the city to reduce costs. Without its central industry, Detroit lost its population and economic vibrancy, showing that cities need to adapt to changing economic conditions to maintain their relevance and growth.

💡Clustering of Industries

The clustering of industries refers to the phenomenon where businesses from the same or related sectors group together in specific cities. For example, Los Angeles is known for the entertainment industry, while Boston specializes in medical research. This clustering happens because businesses benefit from being close to others in their field, allowing them to collaborate, compete, and access a shared labor pool, leading to increased efficiency and productivity.

💡Domestication of Plants and Animals

The domestication of plants and animals was a turning point in human history that allowed people to settle in one place and form communities. Before domestication, humans were hunter-gatherers who moved frequently. By learning to farm and domesticate animals like oxen, humans could produce surplus food, which enabled the development of cities and more complex societies, marking the transition from a nomadic lifestyle to settled urban living.

Highlights

Qatar is the richest country in the world with over 90% of its population living in cities.

Luxembourg and Singapore are also among the top three richest countries with high urbanization levels.

African countries with lower wealth correlate with lower urbanization levels.

There is a direct correlation between wealth and urbanization.

Cities have higher living costs, worse air quality, and more crime, yet people still choose to live in them.

Half of the world's population lives on just 1% of the land.

54% of the world's population now lives in cities, a significant increase from 55 years ago.

The shift from hunter-gatherers to farmers around 10,000 BC allowed humans to settle in one place.

The development of plowed fields and domesticated animals improved farming efficiency.

Technological advancements in farming allowed some individuals to not farm, leading to the development of cities.

The surplus of food and the development of cities went hand-in-hand, enabling non-agricultural jobs.

Cities tend to maintain their historical rank size due to natural selection of optimal living places.

Cities don't change rank on their own; external factors like sovereignty changes or resource discoveries can alter their growth.

The size of cities often follows a predictable distribution similar to natural phenomena like word frequency in books.

Cities exist because they are efficient, with businesses clustering to access a common labor pool and collaborate.

The division and specialization of labor are crucial for the development of our world, making cities efficient places for trade.

Cities make wealth possible by being efficient, and people create cities for this reason.

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Transcripts

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The richest country in the world is Qatar which looks like this.

The second richest country is Luxembourg which looks like this.

The third richest is Singapore which looks like this.

The commonality between these three is that each of them has more than 90% of their population

living in cities.

The three poorest countries—the Central African Republic, the Democratic Republic

of the Congo, and Burundi—each have urbanization levels below 50%.

Comparing the wealth of African countries and the urbanization levels of African countries,

the maps are nearly identical.

This is not to say that cities automatically create wealth or wealth automatically creates

cities, but there is a direct correlation between the two.

Although, it seems strange that humans would choose to live in cities—living costs are

higher, air quality is worse, surroundings are more crowded, crime is more prevalent,

and disease is more easily spread.

If the population of the world spread itself out evenly, every single person would have

5 acres to live on, but we don’t.

We live in a world where half the population lives on just 1% of the land.

54% of the world population now lives in cities, and that’s significant.

55 years ago, only half that lived a city life.

The urbanization of the world is changing the world, but why do cities even exist?

Humans were originally hunter-gatherers.

They scavenged for food and often didn’t live in a set place—similar to how many

animals live—but then in about 10,000 BC we learned to farm.

The domestication of plants allowed humans to finally settle down in one singular place

and establish a long-term home, but farming was nothing like it is today.

The humans of the era lacked technology and expertise.

The first archeological evidence of plowed fields—a process that greatly improves crop

yields—doesn’t appear until about 3000 BC.

It took thousands more years for farmers to successfully domesticate animals like the

ox to pull a plow.

When humans first began farming, nearly every individual had to farm in order to make enough

food to live.

One person’s work essentially produced one person’s food, but through time as technological

advancements occurred, progressively each individual was able to make more and more

food.

Thanks to that, farmers today each feed 155 people.

The process has also become so efficient that only one acre of land is now needed to feed

one person, but back in the early days of farming, once technology had advanced to the

point where one person made more than one person’s food, for the first time ever,

there were some people who didn’t need to farm, and that fact changed humanity.

If that had never happened, we would all still be living in ancient history.

The surplus of food and the development of cities really went hand-in-hand.

It had never before been possible for humans to live in dense urban conglomerations because

they needed land to farm, but these extra people freed from farming were able to work

jobs other than farming which led to languages, literature, science, and really all the technological

advancements that made our modern world.

The spatial patterns of humans really happen quite naturally.

Enough people are each making their decision on where to live that, in aggregate, humans

are going to live in the best places to live.

There’s a sort of process of natural selection that happens as billions of humans each pick

their optimal place to live.

Nothing is manufactured about where people live and numbers back this up.

You see, cities tend to stay at the same rank throughout history.

In 1800 the largest city in Europe was London.

Today, the largest city in Europe is still London.

In 1800 the second largest city in Europe was Paris and it too remains second today.

Cities grow, but those that were large in the past tend to stay large, at least without

external influence.

Cities don’t just change ranking on their own, they change rank if something else changes.

Hong Kong, for example, changed rank when a change in sovereignty to Britain drew people

in while with San Francisco the discovery of natural resources, particularly gold, increased

growth rates while with Washington DC, the coming of a new industry, the US Government,

changed the rank.

If you were to just put a pause on all activity but humans moving, rankings would hypothetically

stay exactly the same, but that’s not even the best evidence for how natural the existence

of cities is.

According to US Census Bureau, the largest city in the US is New York with 8.5 million

urban residents then the second is Los Angeles with 4 million—roughly half as many as New

York—then third is Chicago with 2.7 million—roughly a third—then Houston at 2.3—roughly a

fourth—then Phoenix at 1.6—roughly a fifth.

Each city’s size is almost exactly determined by the largest city’s size divided by it’s

rank.

It is uncanny how closely city sizes in countries follow this distribution.

It’s not just with the US.

Germany’s largest city, Berlin, has 3.5 million residents, then Hamburg has 1.8 million,

almost exactly half, then Munich has slightly more than a third at 1.4 million, then Cologne

has just a bit more than a forth at 1 million, then Frankfurt has almost exactly a fifth

at 700,000.

Now, there are anomalies—mostly countries with recent rapid population growth—but

in a large number of countries, the ranking of cities can be determined by this law, but

what’s significant is what else can be determined with this law.

If you take a book and rank the frequency of words it follows this distribution.

If you take a stadium of people and rank them by income, it follows this distribution.

If you take the sounds a dolphin makes and rank them by frequency, it too follows this

distribution.

This link between a distribution found in nature and the size of cities helps prove

something—cities are natural.

Humans will, given time and technological advancement, always form into cities.

The existence of cities can really only happen when the plusses outweighs the minuses.

Back before the food surplus there were few advantages to urbanized living and a huge

disadvantage—a commute to farming land during a time when walking was for most the only

transportation method.

Today, the plusses have increased and keep increasing to the point where day by day more

and more people live in cities.

A major advantage for the existence of cities is the ability for different businesses to

locate near each other.

Part of the reason this is advantageous is that people come to cities to find jobs because

all these businesses are there and so, if businesses want to hire the best people to

be the best, they have to be in cities.

It’s a bit of a chicken and the egg problem, but nowadays, different cities tend to play

host to different clusters of businesses.

For example, LA is a hub for the entertainment industry, Boston is a hub for medical research,

Dusseldorf is a hub for the telecommunications industry, and Singapore is a hub for the finance

industry.

In addition to the ability to tap into a common labor pool, businesses cluster because they

want easy access to other businesses.

Telecommunications companies like Vodafone, Deutsche Telekom, and AT&T all exist as direct

competitors in Dusseldorf, but the reason they are there is because other companies

exist there are well that they can work with.

Also in Dusseldorf are companies like Nokia, Google, and LG which each make phones that

the mobile service providers might stock in their stores.

By all being in the same place, they can more easily collaborate and therefore they can

run their businesses more efficiently.

There’s a sort of economies of scale effect when all sorts of companies are all packed

together in one place.

Now, not every business is in a city because there are plenty of cases where the minuses

outweighs the plusses.

You just won’t see a car manufacturing plant in downtown Manhattan because it doesn’t

make sense.

While there would be advantages such as access to a higher skilled labor pool, proximity

to other businesses, and reduced transport costs by being closer to the final market,

there are significant disadvantages.

Land costs about $38 per square foot in New York so if Tesla, for example, wanted to move

their factory to the city it would cost over $200 million in land alone.

The benefits would never outweigh the costs and, in fact, it was this very problem that

led to the decline of Detroit.

The city was a major center of automobile manufacturing, but eventually manufacturers

figured out that they could greatly reduce cost by moving the plants out of the city.

Without a major industry to employ individuals, many moved away and the population has steadily

declined for the last few decades.

Cities exist because they are efficient.

Nobody’s forcing individuals to move to cities, but billions have.

Just imagine there were only ten people in existence and one product that each of them

wanted to buy.

If they were all equally spread out across this plane, the logical location for a distribution

hub would be right in the center.

Some individuals would happen to be close to the hub by chance, but overall the product

would have to be shipped a large distance to get to every consumer.

Now lets say that eight of those ten individuals lived together in a mini-city.

The logical location for the distribution hub would then be right by the city.

Shipping for the rural individuals would be slow and expensive but overall the total shipping

distance and cost to individuals would be lower.

You can see this concept with where Amazon puts their warehouses in the UK.

They could have one enormous warehouse at the geographic center of the country and save

some money through economies of scale, but they don’t.

They position each of their warehouses near major population centers to reduce the total

shipping distance.

In our modern context this concept is most easily demonstrated through shipping, but

historically individuals had to purchase nearly all their goods at physical marketplaces.

Even just 200 years ago walking was the primary means of transportation.

In an hour nowadays we can drive 70 miles while in an hour 200 years ago individuals

could walk only three miles so the push to live closer to marketplaces was even higher.

This is why suburbanization is a new concept, but still more individuals than ever choose

to live in cities.

Division and specialization of labor was crucial to the development of our world.

Imagine you made everything you used.

You grew your food, you gathered and filtered your water, you built you own car.

Just imagine how long it would take you to build a car from scratch—at least a decade—and

yet the average individual in the US can buy a brand new car with the money they earn in

about six months.

That’s because there are people better at making cars than you.

There are some people who focus solely on mining iron then some individuals who focus

solely on making glass and so there are thousands of people producing all the different inputs

that go into making your car in the most efficient way possible.

Let’s say that you, for example, individually can make a pencil in 60 minutes and paper

in 30 while another individual can make a pencil in 30 minutes and paper in 60.

In a closed off world it would take each of you 90 minutes to make a pencil and paper,

but let’s say you make two pieces of paper, which would take you an hour, and the other

person would make two pencils, which would take them an hour, and then you each trade.

Neither of you have given up anything, you get exactly what you would have gotten by

working independently, but you have each gained time.

This is exactly why trade is beneficial.

Certain people are better at making certain things, so by everyone specializing in what

they are good at the entire world gets more without giving more.

This is how efficiency happens.

Cities make this trade easier which leads to more of it happening and therefore cities

are efficient.

Humans naturally want to find the path of least resistance and, with our spacial patterns,

the path of least resistance is to all live together.

Of course rural life will always exist and needs to exist, but if you were to have a

hand to pick up and organize every human into the most efficient pattern possible, this

is what it would look like.

Cities don’t create wealth and wealth doesn’t create cities, but rather cities make wealth

possible.

Cities are efficient and efficiency creates wealth, and so people create cities.

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