Doing Business in... Berlin and Hong Kong

Disasters have a way of becoming part of the fabric of cities: in Chicago, the Great Fire led to innovations in construction that were an integral part of the creation of its modern skyline; the wide avenues of Paris were designed to frustrate further revolutionaries; and the 1923 earthquake in Tokyo enabled a sweeping modernization. Elsewhere, the defining moment was not a disaster but an entire era of unusual activity, such as in Berlin and Hong Kong.

Berlin had a difficult twentieth century for many well-known reasons, but the one weighing most heavily on it today is the decades-long division into East and West, mirroring its country. Berlin today remains Germany's largest city, but the years that West Berlin spent locked deep in East Germany took their toll on the city's influence: modern infrastructure like air hubs, stock markets and major train stations sprung up in Frankfurt, and businesses found it more practical to locate there and in other cities like Cologne and Hamburg. When Berlin was restored as the national capital in 1999, it reassumed some of its prestige, but many of the government's administrative jobs remained in the former West German capital of Bonn, given the difficulty of relocating functions that had been there for half a century.

Hong Kong was not cut in half like Berlin, but it was held apart from its natural homeland, the neighboring People's Republic of China, thanks to its control by the British from the 19th century until 1997. In an earlier era of globalization, when western businesses were starting to investigate Asia but when it was difficult to establish operations in many Asian countries directly, this proved a boon for Hong Kong; its hybrid British/Chinese nature made it a natural bridge between cultures. The 1997 handover of control to China, much cause for concern at the time, resulted in little change to the territory's character, but Hong Kong has recently struggled with a more fundamental problem: competition. Hong Kong's longtime competitive edge in offering access to China loses all value when businesses can achieve similar results with a presence directly in Shanghai.

Both Berlin and Hong Kong have spent the first decade of the 21st century trying to plot a path out of their 20th century legacies. Berlin spent lots of money on tidying up a city center where the Berlin Wall once stood, and the results mix traditional and modern in strikingly beautiful ways. The city is still inexpensive relative to other European capitals, which has made Berlin a sort of hipster mecca; it is also massive in land area and still relatively sparsely populated, which might leave room for further build-up of business without crowding out the city's unique culture, a phenomenon often fretted over in New York.

Hong Kong has many of the opposite problems: thanks to its precarious and tightly bounded perch on the Chinese coast, it has long been among the world's most densely populated cities, and apartment prices and sizes make one long for the spacious bargains found in the nicer parts of Manhattan. It still attracts a large ex-pat community by being a dynamic, exciting place to live, but having been largely disintermediated from its historical role as a gateway to China, multinationals may start to wonder why they're paying such astronomical rates to keep a presence there. Meanwhile, access to other regional markets is getting easier: Singapore provides a similar function to Hong Kong for much of Southeast Asia, and is cleaner and more orderly to boot.

The end of the 20th century found Berlin and Hong Kong each with legacies of separation, and with nearly opposite problems: big, empty, and struggling to regain its historical competitiveness on the one hand, and tiny, overcrowded, and struggling to maintain its historical importance on the other. But both have lots of fans thanks to their culture and energy, which is something that sleepy Frankfurt and Singapore will find much harder to emulate. The only remaining question is which model business leaders, when deciding where to place headquarters, branches, and facilities, will find more appealing.