The Brookings Institution, a middle-of-the-road Democrat think tank, has posted a review on crypto-based jobs and startup activity, noting that crypto startups are just as volatile as crypto in general.
The report is predicated on the belief that local officials need to embrace tech innovation if they want to foster job creation and greater economic activity.
The authors report that:
“The significant crypto surge and relatively sustained activity witnessed in New York, San Francisco, and Los Angeles underscore the “superstar” nature of how disruptive technologies (especially digital ones) cluster in the largest markets, while frequently leaving other places behind. Even as many local leaders sought to attract crypto businesses to create or grow technology hubs in their regions, the evidence presented here suggests that the metro areas that emerged as the most significant and resilient crypto centers had already developed solid regional advantages in tech or finance before seeing sizable crypto growth. In contrast, most other metro areas struggled with crypto labor market and startup declines after the spring 2022 market crash, and did not significantly recoup those losses. In short, the digital rich prevailed and most others went sideways.”
In other words, it is best to already have a strategy in place to attract innovative firms as well as an already established tech ecosystem that feeds off of change.
Miami is one area that generated a lot of news as more firms fled high tax/high crime regions to set up shop in tax and business-friendly Florida. Yet the rise, fall, and rebound in Miami is smaller than the other established regions. Things take time and a lot of effort.
The “gold rush” effect leads to a “wild” ride for the blockchain/crypto sector. The most recent crypto winter and collapse of multiple once prominent firms like FTX etc. creates extreme volatility for jobs and new firms. Brookings says that few digital asset startups have been “stable or sustainable.” The authors state that the crypto boom has left behind “troubling pollution and energy costs,” failed projects, investor losses, and fraud.
The fact that regulators in the US have been slow actually to craft rules that address the nuances of digital assets has not helped. Brookings says a light-touch regulatory approach has not proven to be conducive for crypto centers to grow as NYC has the most rigorous rules. But this skips the fact that financial services is one of the most regulated industries in the world, and crypto entrepreneurs have been begging for more defined regulation in the US.
But Brookings believes that local leaders may want to consider other types of businesses to attract as opposed to competing with SF, NYC, and LA. They suggest local leaders should make certain that emerging tech is proven first. Of course, this is hard to do in an innovation-driven economy that tends to be iterative – keep trying but a lot of failures. Does anyone remember the early search engines that dominated before Google came along? Or perhaps the early days of e-commerce before Amazon started to sell books online? I do. But the authors may have skipped that lesson.
It is an insightful report that avoids the fact that without risk, there is no innovation. You may read it here.
