A blog post about Munich is basically an excuse to post pictures of girls in dirindls
I’m in Munich, Germany at the moment, working on a new Internet company that is growing in leaps and bounds. We’re hiring lots and lots of people, both technical (developers) and non-technical. Something in particular about this interests me – Munich isn’t Germany’s first city, it isn’t even its second – in fact Munich is the 3rd largest city in Germany behind Hamburg and the capital, Berlin.
Why does this so fascinate me? Well, can you imagine setting up a brand new Internet company in the UK’s 3rd city? According to Wikipedia, Glasgow is the UK’s 3rd city. In fact, let’s forget Glasgae for a second, can you imagine anyone ever setting up a brand new super successful Internet company in Birmingham, the UK’s 2nd city? Nope, neither can I.
In the UK it seems that unless you’re in London, you’re nowhere. How does one city get to dominate a country so much, and is it good for the UK? According to George Zipf’s theory of rank-size for an ideal distribution of city size the 2nd city should be half the size of the largest city, and the 3rd city 1/3rd the size, and so on. Mark Jefferson described “primate cities” as those that so dominate the country that they capture most of the population and economic activity in a country. Classic Primate Cities include London and Paris, whilst the most extreme example is Bangkok, which is 40 times larger than the next city.
Compare that to Germany, where Berlin has a population of 3.3 Million, Hamburg is 1.6 Million, and Munich is about 800,000. They almost perfectly follow Zipf’s Law. So which ecomony is doing the best out of UK, France and Germany? Yeah I won’t bother answering that…
Although Berlin, where my direct employers are actually based, is itself considered a bit of a European startup hub, I never get the feeling that it dominates Germany in the same was that London dominates the UK. I don’t think many of my non-British friends in the UK would seriously consider living anywhere in the country other than London. In fact, do people even want to visit Birmingham or Glasgow? Not really. Other than a weekend trip to Edinburgh, for most people London is the UK.
Everyone had gone to Bradford for the weekend.
So for someone from a far-flung corner of the UK, that’s a bit depressing. What chance does Dundee have of becoming some kind of gaming hub, when as soon as a company gets successful it will probably up-sticks to Edinburgh, like Rockstar – developers of Lemmings and Grand Theft Auto – did (yes – Grand Theft Auto was developed in Dundee!).
The UK Government acknowledges the London dominance by trying to force some taxpayer-funded organisations to move to provincial cities. Even the BBC is getting in on the act by moving its BBC breakfast programme to Manchester – a move which is proving rather unpopular with the staff.
I doubt London will ever lose its “Primate City” status in the UK. Nevertheless, I think government is obliged to keep trying to encourage companies to invest elsewhere in the country. Which is why you will get some pretty good incentives to start a company in places like Scotland. Here’s a story in which a founder of an Internet company got a £250k grant from Scottish Enterprise. I was also pleased when my MBA classmate, Xavier, told me that one of the reasons he set up the first Better World Books overseas subsidiaries in Scotland was because he was impressed with how helpful Scottish Enterprise was.
Maybe there is hope!
The wannabe VC 
Great post, totally agree. Japan is an extreme example too. Tokyo has the vast majority of company head offices and therefore most of the jobs and therefore most of the talent. Companies which are technically based outside Tokyo are the exception and likely still have some, if not most of their personnel based at offices in Tokyo. Looking at population sizes, Tokyo has about 9 million, 13+ million if you include nearby Yokohama, with Osaka and Nagoya following thereafter with around 2.5 Million each. Local prefectorial governments try to encourage start ups and other businesses to relocate to their areas, but unless there is a good reason – usually the founder’s personal ties to an area then they tend to fail. Such a situation probably does have consequences for Japan’s economic success, as those not willing to move to Tokyo have little chance to progress their careers or indeed start new businesses (as finance and potential customers/supplies are located in and focused on Tokyo). It could also represent an existential threat to Japan’s economy should a natural disaster hit Tokyo as it is predicted to do in the near future (Earthquake and or Tsunami or indeed Volcanic ash from a predicted eruption of Mount Fuji being the most likely).
As for Grand Theft Auto originating in Dundee, I guess with the well publicised levels of car jacking, random shootings and international drug deals going down in the city, it’s no surprise. Clearly Dundee leaves Detroit looking like Sylvanian Familyville…
Very interesting article. History plays a great role in these things: France was an absolute monarchy, followed by the revolutionaries who wanted to systematise everything (these were the people that came up with decimal time, after all!). Both led to an extreme centralisation around Paris that by this point has been built into the country for centuries. Germany hasn’t even been one country until very recently, and only for relatively brief periods in history (from Bismark to Hitler and from 1989 until now).
So Munich now may be the third largest city in Germany, but until the First World War it was the capital of the Kingdom of Bavaria. That plays a role in a city’s prestige, and self-image. (It’s also why tourists love and are ever-impressed by Edinburgh, in a way they never will be by Birmingham or Manchester. Or Glasgow, for that matter.)
The UK is nowhere near so centralised as France (and is becoming less and less so with each passing year). But London’s stature has very little to do with it being the capital or largest city of the UK: it was the capital of the British Empire. A hundred years ago you would not have calculated its “primate city” ratios against Glasgow or Manchester–you would be looking at Karachi, New Delhi, Melbourne, Toronto, Hong Kong…
Those kinds of historical effects take a long time to wear off: the most striking example in Europe is probably Vienna, which, like London, became the very oversized capital of a very small country when the Austro-Hungarian empire broke up. The next largest city in Austria, Graz, is 1/7th the size. But if Budapest, Prague, Krakow, Sarajevo, etc. were still in the mix, it would be a very different picture.
The Kingdom of Bavaria and the British Empire may be things of the past, but their residual prestige still influences people’s behaviour quite a bit.
That may be bad news for Dundee as far as attracting large foreign companies. But the good news for mid-sized cities is that historically they have done very well growing their economies if a business organically grows up there (just think of how Oxford’s fortunes were changed by an apprentice in a bicycle shop, who went on to become Lord Nuffield). Surely as an entrepreneur you wouldn’t have it any other way!