Tuesday, February 20, 2018

The Declining Cost of Distance and How That May Impact the Arts

Good morning
"And the beat goes on........................"

One trend being watched in the business / corporate world is that of the Declining Cost of Distance.  In the past, the cost of distance has been the dominant driver of where businesses locate, where they produce, sell and do business, and where people decide to live, shop, play and work.  The cost of distance is measured as the cost of moving things - information, goods, people.  And for a long time that cost determined physical location of both work and workers.

According to a study entitled Spatial Economics: The Declining Cost of Distance
February 10, 2016 by Bain and Company, and authored by Karen Harris, Andrew Schwedel and Austin Kilson:

"For centuries, the cost of distance has determined where businesses produce and sell, where employers locate jobs and where families choose to live, work, shop and play. What if this cost fell dramatically, thanks to new technologies? How would the global economy change if manufacturers could produce locally in small batches, without incurring excess cost? Would existing business models and supply chains, for instance, suddenly become uncompetitive? If people could work from anywhere, would crowded neighborhoods start to thin out?   
That change already has begun in the world’s advanced economies and is gathering momentum. Over the next two decades, the cost of distance will decline sharply, according to Bain research, altering the way we live and work—faster than most people expect and more broadly than many imagine." 

Technology has changed the fixed reality of where you live and work, by making it possible to live a great distance from your job.  And technology has changed the fixed reality of where businesses decide to locate as well - no longer necessarily tethered to close proximity to a client base, office locations, its employees, the means of distribution or of supplies.  

Indeed telecommuting may likely greatly expand.  As the report noted:

"As millennials become a dominant share of the workforce this decade, physical freedom and increased online skills will add to the momentum for telecommuting. Already 37% of US workers say they telecommute or have done so in the past (on average, two days per month), up from 30% in 2008 and 9% in 1995."

Urban centers - cities and regional markets - were created in part by the need to centralize operations and cut the cost of distance.  But that imperative is disappearing as robotics, autonomous delivery options, 3 D printing and other technological advances make it less necessary to locate in major metro areas.  Indeed, the trend for many companies moving many of their functions out of expensive cities and either relocating to suburbs or even offshore, started even before the current technological revolution.

Amazon is one case in point, and that model has already dramatically changed how people shop, eliminating the necessity to go to stores.  It hasn't replaced stores completely, but its now established as an alternative - one that seems increasingly attractive to shoppers.  Of course, Amazon isn't completely free from cost of distance considerations, as its warehouses still need to be planned and located strategically near delivery systems, but even that may be changing with the advent of automated delivery options like drones.  And while it needs the physical presence of a percentage of its employees as specific locations, that may be changing too with "at home" work options, automation and even artificial intelligence.

We may be on the cusp of an exurban world.  What are the societal implications for a shift resulting from a decline in the cost of distance?  And what are the implications for the nonprofit arts.

Specifically - and this is by no means an exhaustive list of things we ought to be thinking about:

  • If there is a population shift away from cities towards less developed suburban and rural areas, there may need to be a shift in audience development strategies.  Fewer people who can easily commute to a performance or exhibition, will necessitate the need for finding new ways to attract and entice both those possibly smaller subsets remaining in a defined area, and those growing cohorts no longer in the area.  We have already witnessed the negative effects of intolerable commute situation on the willingness of some consumers to brave the traffic to attend events even relatively near their homes or workplaces.  If a percentage of the urban population relocates, how will we attract them to our offerings?  
  • On the other hand, as the report points out:

"Cities and suburbs will have to contend not only with more attractive exurban and rural developments outside the traditional commuter belts, but also with other cities offering better quality of living. Some urban features are fixed, like climate and natural geography. But other features can be shaped by development initiatives and policy, including civic arts and culture, universities and centers of intellectual capital development, and government regulations and tax policy. These features may become the basis on which cities compete."  

  • It may be that as urban density and traffic lessens, coupled with advances in driverless cars, trekking into the urban center for cultural offerings may become more attractive, and less onerous.  We just don't know how all of this may play out. 

  • At the same time, populations of newer areas - as they develop and grow - may have a need and demand for localized options - including arts and culture.  And some of our arts organizations may find it advantageous to move to meet those new local demands.  Or new ones may spring up.  If that happens and meets some of the demand for our offerings, then those left in the city centers will have a smaller audience pool from which to attract customers and a more difficult task in wooing people outside the city centers to their shops.  

  • Artists have already begun that flight due in the main to the high cost of city housing and work space. Their exodus is rightly decried as negatively changing the culture of major metro areas and any number of cities are trying to figure out how to address the rising costs of living in their centers.    On the other hand, if there is a flight from cities, that may ultimately bring down the cost of housing and doing business in the urban area, and so we may have a situation conducive to the reintroduction of arts and artists in the urban settings.  But if artists are moving already, and increasingly relocating to those exact areas that stand to grow because of the declining cost of distance for business, then perhaps the attraction of being at ground zero of the development of new communities will work against them being lured back to the city which priced them out of housing in the first place. The point here is we don't know how it will play out.  Cities may well become a luxury obtainable only by the wealthy, and were that the reality, that too would have an impact on the current arts ecosystem and which organizations might survive a major upheaval in location logistics.   Moreover, if urban populations continue to move to higher percentages of the wealthy - that may, arguably, help the funding of the arts, or at least a portion thereof.  It maybe that funding goes to a small subset of the arts within a city that are favored by, or in which ownership is perceived, to the exclusion of other kinds of art.  In short, the current funding inequity could grow worse.

  • Then too, as more diverse populations may center in certain of the new areas, more multicultural arts organizations may also move where they may find a more receptive population of both audiences and supporters, as denizens of these areas have more leisure and discretionary spending funds as their costs of living go down.  Theoretically it may be possible that both city centers and the newer growth areas may each reflect an increasingly limited diversity, and ghettoization of space may take on new meanings.  

  • While the cost of distance may decline for business, it may rise for fixed location arts organizations as employees relocate to more affordable and more convenient non urban areas.  Already, in many areas arts organization workers cannot afford to live in close proximity to the physical location of their job.  If they can telecommute, that won't be a problem.  But not all of out people will be able to telecommute, even if they wanted to, as their physical presence is demanded by the nature of performances and exhibitions.  Organizations may find it essential to pay part of the costs of those commutes in order to attract the best talent, thus increasing their costs.  While businesses can possibly afford to run smaller scale operations, that isn't likely to work for us.  Taking the arts to where the people are is fraught with logistical and artistic challenges, as well as prohibitive expenses.  We've tried.    

Titanic shifts that have profound potential impacts, frequently present conflicting dynamic scenarios as possibilities.  Changes in the cost of distance may affect everyone in society and may result in major population shifts.  Or it may not.  It is difficult at this stage to know what the impacts will be, let alone how we can best respond to those impacts, but as the possibility looms, we really ought to start thinking about this kind of stuff.  The best arts and cultural strategic plans that do not take into consideration these kinds of changes may very likely end up irrelevant.

Nobody really knows for sure what it all may mean.

Have a good week.

Don't Quit