Start-Up City: Entrepreneurs are the heroes of New York’s past and the key to its future

November 15, 2010

City Journal:

Like the rest of America, New York City has been buffeted by the recession that began in December 2007. This past August, the city’s unemployment rate stood at 9.6 percent, just over the national rate of 9.5. But New York’s economy will never recover from the downturn by trying to compete with China’s labor costs or with Houston’s housing costs. Nor can the city continue to rely on finance, which came to dominate it over the last 40 years: as the sad history of Detroit illustrates, one-industry towns rarely succeed in the long run. Rather, New York’s success will depend on its ability to produce a steady stream of new products and ideas.

Indeed, studies have shown that all over the country, entrepreneurship—along with January temperature and education—is one of the three great predictors of urban success. But nowhere is that more the case than in Gotham, whose very history is a tale of entrepreneurship. To survive, New York must continue to bring forth innovators who will reinvent the city—with luck, making it more economically diverse. If they succeed, it will change as much between 2010 and 2050 as it did between 1970 and today.

Entrepreneurs have played a key role in every stage of New York’s development. During the early nineteenth century, when waterways were the lifelines of commerce, New York owed its expanding sea trade partly to natural advantages: a safe, centrally located harbor and a deep river that cut far into the American hinterland. But those advantages became important because of the vision and energy of entrepreneurs like Jeremiah Thompson, the gambling Quaker. Thompson immigrated to New York at 17 to work in the American branch of his family’s wool business. By the 1820s, he had established himself as America’s largest importer of English clothing, its largest exporter of raw cotton, and its third-largest issuer of bills of exchange.

As a global trader, Thompson was acutely aware of the shortcomings of the transatlantic ships of the time, which would stay in port until their hulls were filled with goods. (Imagine showing up at LaGuardia and having to sit around until the airline sold enough tickets to fill the entire flight to Frankfurt.) Thompson saw an opening and created the Black Ball packet line, whose ships set sail on a scheduled day every month, no matter how light their cargoes were. His innovation was a gamble, since sometimes his ships sailed with relatively empty hulls, which meant less income from the merchants who bought the space. But a virtuous circle developed: fixed schedules attracted more cargo, and more cargo made ships sailing on fixed schedules more profitable. Once Thompson was turning a profit, other packet lines, like the Yellow Ball and Swallowtail lines, entered the market. An 1827 letter to the New England Palladiumdescribed the significance of Thompson’s invention: “I consider Commerce by lines of ships, on fixed days, an invention of the age nearly as important as Steam Navigation and in its results as beneficial to New York, which has chiefly adopted it, as the Grand [Erie] Canal.”

Thanks to such innovation, the city grew great during the first half of the nineteenth century, its population rising from 33,000 in 1790 to 814,000 on the eve of the Civil War. In 1821, New York’s exports, measured in dollars, were less than 10 percent higher than Boston’s. By 1860, New York was exporting over 700 percent more than the city on the Charles.

The surging harbor traffic was important to the city not only directly but also because of the business that sprang up around the port. New York’s three largest nineteenth-century industries—sugar refining, apparel manufacturing, and printing—all benefited from the ships coming into the harbor. Again, the rise of these industries did reflect the city’s innate advantages. Sugar refining thrived, for example, because New York was the natural hub of the triangular trade that connected the northern colonies with European manufacturers and markets and with southern sugar, tobacco, and cotton farmers. Since so much sugar was already flowing into New York’s harbor, it made sense to refine sugar nearby. By 1860, 18 of America’s 39 sugar refineries were in New York.

But New York wouldn’t have become America’s sugar capital without risk-taking entrepreneurs. In the mid-eighteenth century, Isaac Roosevelt, Franklin Delano’s great-great-grandfather, started refining sugar near Wall Street. He was taking a substantial risk—sugar refineries were big factories for their time—but his investment paid off. Roosevelt later became president of the Bank of New York and a New York state assemblyman. Some suggest that the Roosevelt interest in politics began because Isaac didn’t like British sugar policies.

Roosevelt’s success foreshadowed the even more remarkable path of German immigrant William Havemeyer. Havemeyer learned the sugar trade in London and came to New York in 1799 to manage a sugar house on Pine Street, carrying a bill of exchange drawn on Isaac Roosevelt’s sugar-refining son. Havemeyer eventually broke away to form his own enormously successful firm, which his descendants would rename Domino Sugar…

Read it all.

About these ads

One Response to “Start-Up City: Entrepreneurs are the heroes of New York’s past and the key to its future”

  1. I think you have said it perfecty when referring to entrepreneurship skills. Something I believe should be taught in schools from an early age – I also believe that there should be as much funding (where economically viable) to encourage entrepreneurs to work, experiment and expand within the city.

    It will always help the economy of NYC.

    Thanks for this great post.

Comments are closed.


Get every new post delivered to your Inbox.

Join 83 other followers

%d bloggers like this: