pellino_fullBy 2050, 70 percent of the world’s population will live in just 200 cities, said Dan Pelino, IBM’s global public sector general manager, at the 2013 ULI Fall Meeting in Chicago. These cities will account for 75 percent of the skilled labor and 91 percent of the global economy. And such growth raises a question: While some gateway cities will continue to prosper, how will the cities on the lower end of those 200 cities—or those not even making the list—stay competitive?

Here is a video clip from Pelino’s session:

Dan Pelino: The Future Is Not What It Used to Be from Urban Land Institute on Vimeo.

From Pelino’s perspective, health care and education are going to be the key drivers to staying competitive. He talked about his hometown of Rochester, New York. The city faced the destruction of three of its biggest employers in 2005, so municipal leaders doubled down on two areas of strength—health care and education, investing in hospitals and colleges like the University of Rochester.

The area’s grocery store chain, Wegmans, differentiates itself from its competition by focusing on prepared meals and fresh fruit. The grocer has a devoted following and is now a sought-after anchor tenant in new developments on the East Coast.

Because health care costs have dropped in Rochester, Pelino said it is the third-most attractive American city for business. IBM has more than 900 people working in Rochester, leveraging some of the intellectual property of defunct companies like Kodak and refocusing it on health care. But he also pointed out that smaller American cities like Buffalo and Rochester could benefit from sharing services. For example, both cities probably cannot sustain their own airports

pellino_vertIn Denmark, Pelino says, 75 percent of health spending is on primary care, the opposite of the United States, where more spending is directed at specialists and other services. Denmark also has proportionately fewer hospitals than the United States because the population has less need for emergency care. The health of its residents is also boosted because cycling is one of the primary modes of transportation.

On the education side, Pelino is working with video game makers to integrate games into the educational process. “You create an experience that will enrich their education,” he said. Having raised his children in Chicago, Pelino says K-12 public education is still a big issue in most cities.

Working in more than 170 counties, Pelino’s main message is that the future is not going to be quite what we expect. He sees stimulus coming to Europe, to the tune of 960 billion euros over the next six years. China also may be shifting to stimulus, just as the United States is looking at tapering its economic stimulus.

“There is a tremendous amount of money available for developing cities,” he said, with grants available from organizations such as the Bloomberg, Clinton, and Gates foundations.

But one component that should not be overlooked in urban development is the element—and effectiveness—of fun. Pelino pointed to this video of a—let’s call it retuned—staircase that was remarkably effective at enticing people to be active and climb the stairs, instead of riding a nearby escalator.