Why New York City Is Cooked

about 2 months ago

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New York City is getting a lot of attention.

The election of Mayor Mamdani certainly sent things into a whirlwind. This, however, is only a new development on top of a long list of policy decisions that could be adversely affecting the city.

Many are speculating whether the city will ever come back. Proponents cite the city's bankruptcy in the 1970s, a move that was deemed fatal. In spite of that, the city did rebound, aided by the Reagan years of the "Roaring 80s," which saw a massive surge in stock market interest.

Today, Wall Street is still a major contributor to the city's tax base.

Things are changing. We are watching an exodus, similar to what happened in the 1970s. The question is whether this can be stopped and if things will reverse.

Why New York City Is Cooked

Here is an interesting video to watch.

JPMorgan just moved $500 billion worth of capital out of the city. This is part of an ongoing trend by financial firms.

The same bank made news when it was announced that it employed more people in the state of Texas compared to New York. Let that sink in for a moment.

A historic Wall Street bank has more people in Texas than the Big Apple.

That is a huge blow.

Many are aware of the saying "capital always goes where it is treated best." When it comes to the financial sector, this is spreadsheet stuff.

Both the city and state have seen fit to raise taxes over the years. Mamdani is looking to assess even more if the state will agree.

Here is where capital takes flight. When you have states like Florida and Texas offering zero state income tax, that begins to look attractive.

Of course, this is only one piece of the puzzle. The other is regulation.

Texas is going to have its own exchange starting in 2026. This means that companies will have access to the capital markets without ever touching New York. This is something many are looking forward to, considering the onerous regulations exchanges have placed upon these companies.

The End

Will the city rebound?

What I describe here is no different than what took place before. So why do I claim it is the end of NYC as the global leader?

The answer is simple: it is a different era.

Look at downtown areas of most major cities. We see household names atop the largest skyscrapers. There was a time when physical location mattered.

That is no longer the case.

At the same time, the pool of talent is mobile. People are accustomed to relocating. Few are still in the towns they grew up in. Hence, the move to NYC to accept a job at JPMorgan can easily become Texas.

The spillover effect is what really causes the damage. Each time major employment shifts take place in an area, everything else is affected. Those who are "stuck" in the area are left to suffer. They also tend to get stuck with an increased tax bill since politicians never stop spending (regardless of party).

New York is destined to lose Wall Street. This is almost a guarantee. The industry itself is primed to be upended, although financial firms will likely come out the other side. Nevertheless, the days of setting up shop in NYC because that is where the action is have ended.

There is a good chance that AI takes over large portions of money management. That means a lot of these firms will face headwinds. Of course, when this happens, we look at the idea of cutting costs.

Here is where other locations make sense. If a company can get the same productivity for 30% less, it is going to do that.

The reality is that geographic location, for business purposes, means fundamentally less today than it did 40 years ago. Back then, you needed to be in New York to access capital markets, recruit top talent, or close deals—the friction of distance was real and costly. Now? A fund manager in Austin can execute the same trades as one in Midtown. A software engineer in Miami can collaborate with teams across the globe. The infrastructure that once made physical proximity non-negotiable has been dismantled by technology.

This shift is going to have a profound impact on cities facing decline, especially those that built their entire economic model around being the only game in town. The problem is compounded by the fact that even if a city manages to stop the bleeding—even if it stabilizes job losses and tax revenue—reversing course is exponentially harder. Once the talent leaves, the networks dissolve, and the cultural cachet fades, attracting people and capital back requires more than just policy tweaks. It requires rebuilding something that took decades to construct in the first place. And in a world where people and money can go anywhere, the incentive to return to a high-tax, heavily-regulated environment is minimal. The competitive advantage that once seemed permanent turns out to have had an expiration date.

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