The AI Revolution is likely to cause a massive counter-urbanization. People will move from big cities into smaller cities and rural areas.
The Industrial Revolution created economic opportunities that pulled people into cities. The Interstate Highway System created access to a quality of life that pushed people out of cities. Population movement is driven by these push and pull factors – including economic opportunity, quality of life, and cost of living.
The AI Revolution represents an inflection point where all three factors will disproportionately improve smaller cities and rural areas.
Economic opportunity: There are roughly 70M knowledge workers in the US, heavily concentrated in the major cities. These jobs will still exist; but we can achieve greater output with far less people. We simply won’t need as many accountants, lawyers, consultants, analysts, etc. Economic opportunity in the cities will contract, but it will organically expand elsewhere – in the trades, manufacturing, and the ‘human economy’ that requires presence.
Quality of life: Smaller cities and rural areas represent a sense of community, space, and family-oriented environment that is difficult to match. As economic opportunity disperses and transportation infrastructure advances (i.e. AVs and high-speed rail), access to the city becomes less of a constraint — and the value proposition for less populated areas will be increasingly attractive.
Cost of living: The collapse of knowledge work will create a difficult transition for cities. Knowledge workers are essential to the city’s fiscal architecture. For example, New York City’s annual budget is roughly $112B. Over 80% of the fiscal base is directly exposed via property tax (46%), personal income tax (23%), and business income tax (14%). The productivity gains will be immense; but value will accrue to shareholders. Cities still rely on the workers’ taxes and presence. Costs will stay (or rise) as that tax base falls – weakening the value proposition of cities for those displaced or unhappy.
The speed of change will be faster than any other prior revolution. The manufacturing collapse that hollowed out Detroit, Cleveland, and Pittsburgh took 30 years. Workers had time to retrain or retire, and cities had time to attempt reinvention. The AI revolution will be much faster.
Many people will adapt by moving out – for better economic opportunity, better quality of life, and lower cost of living.