Bain's Spatial Economics: The Declining Cost of Distance suggests that an array of new technologies "have pushed the cost of distance to the tipping point" - and will lead to major changes in business and society in the near future.
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.
This next big economic shift will create an astonishing array of opportunities for businesses and investors—and unexpected risks.
Key quote on the technologies Bain believes are driving this shift:
The catalyst for this historic shift is an array of new platform technologies that have pushed the cost of distance to the tipping point. Multibillion-dollar investments in robotics, 3-D printing, delivery drones, logistics technology, autonomous vehicles and low-Earth-orbit (LEO) satellites are giving rise to new products and services that sharply erode the cost of moving people, goods and information. As these technologies combine and converge, change will accelerate.
Key quote on the 4 things businesses should be doing given the declining cost of distance:
Evaluate the risk of developing stranded assets; review supply, distribution and logistics chains with an eye to stripping out distance costs; incorporate new technologies into existing workflows to test and learn; and anticipate the migration of human capital and talent.
Bain suggests that these trends will result in what they call "the post-urban landscape".
This will consist of cities with large walkable urban cores that are able to attract the wealthy, as well as highly talented creatives and other professionals that can afford these areas. Think SF, New York, London, etc.
In the post-urban model Bain suggests that due to costs increasing numbers of the middle class will move to "New Villages". These are "residential zones lying at the furthest edge of the traditional metropolitan commuter belt, more than 50 miles or a 90-minute commute from city centers."
These new villages will offer lower costs, more space and many of the amenities of urban cores because of the declining cost of distance. In some cases these New Villages will also be in attractive locations - Jackson Hole, for example.
The losers in this view are cities (big and small) that don't offer attractive urban cores and large numbers of high paying jobs. Other losers include closer in suburbs and towns that offer fewer amenities than the cities, yet don't have the low cost of the New Villages.
What Bain seems to be suggesting is we're on the cusp of version 2 of the paradox of place.
The paradox is even though the Internet and connective technologies have made working remotely easier than ever, people and companies are increasingly clustering together in fewer, more valuable locations.
This is happening because in our knowledge-intensive world, industries and people cluster in order to share information, generate ideas and cut deals. These activities are all still better done face to face.
Talent also clusters, both to share information and also to have access to networks and new opportunities. Often this clustering is happening in urban cores (think SF, New York, etc.), which in addition to business opportunities offer a variety of other amenities.
Bain is suggesting that a new set of technologies will make place even less important in some ways - and even more important in other ways - than location is today.
We certainly agree that the declining cost of distance is a megatrend. In fact, it's always been a megatrend.
After all, declines in the cost of distance have been major drivers of change throughout human history. Without declines in the cost of distance we wouldn't have had colonization, globalization, World Wars, the Beatles, etc. - and that's just looking back a few hundred years.
Going back even further, think about the impact of the wheel, sail boats, the domestication of horses and other early technologies that reduced the cost of distance.
So this is a trend worth paying attention to.