Tuesday, December 16th, 2014
[ My fellow Accenture alum Mark Suster is a former startup founder and now a VC based out of Los Angeles. Hence he writes the fantastic tech startup blog Both Sides of the Table that’s a must read if you’re into tech startups. This recent piece particularly caught my eye as it’s relevant to so many cities’ startup scenes. Mark graciously gave me permission to repost it here – Aaron. ]
I was at a dinner recently in Chicago and the table discussion was about building great companies outside of Silicon Valley. Of course this can be done and of course I am a big proponent of the rise of startup centers across the country as the Internet has moved from the “infrastructure phase” to the “application phase” dominated by the three C’s: content, communications and commerce. But the dinner discussion included too much denial for my liking.
I think startup communities being simple cheerleaders doesn’t help anyone. Those of us outside Silicon Valley need to make an effort to effect change not just wish for it.
At the dinner some of those arguing that Chicago has everything it needs now that it has built: Groupon, Braintree, GrubHub and others and that it has “come along way” and “will never get the full respect it deserves just because it’s not Silicon Valley.” But I think this misses the point. I’m a very big fan of Chicago. I started my career at Andersen Consulting (now Accenture) so I went to Chicago many times a year for nearly 9 years. I then got my MBA at University of Chicago so I secretly pull for local entrepreneurs as long as they don’t make me visit in the Winter any more.
But no community can become complacent with the wins that it has. It’s not the great companies you build, it’s the silent killer of those that should have been build locally and weren’t. It’s the thousands of jobs that weren’t created but you don’t even know it.
Think about Facebook had it stayed in Boston. Could it have become the behemoth that it is today? Who knows. But I’ll bet the Boston community would take 50% of the success of Facebook built locally. And the truth is that successful startups beget more successful local startups, wealthy VPs who go on to build their next startups, etc. Even Mark has acknowledged moving wasn’t the be all, end all in this famous interview:
“If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me.”
Boston is still a great tech hub. But wouldn’t it want to be great PLUS have Facebook?
We have similar stories in LA and most people don’t know it. For example, Lookout is a mobile security company that was founded by three talented graduates of USC. They started their company in LA but a couple of years after raising capital from Khosla Ventures in the Bay Area they ended up relocating there. A few years later they announced $150 million in a funding round at $1 billion+ valuation and are ramping up jobs to secure their market-leading position. You could say the team would have gone North anyways. Perhaps – who knows? But I know with local funding and local support that’s certainly less likely.
And consider Snapchat – one of our hometown favorites as they’re based in LA (Venice Beach). Luckily for our community the founders decided they wanted to build their company in LA regardless of not having local funding from LA. That’s our great gain as Snapchat has also raised a lot of money at a monster valuation ($10 billion reported) and has been scooping up talented Stanford engineers and relocating them to LA. Locally we call it “the Snapchat effect.” The VPs of SnapChat will be LA’s great founders 5 years from now.
Silicon Valley is littered with startups where the founders were originally in LA. Klout was an LA company – sold for $200 million to Lithium. As was FarmVille (sold to Zynga) and many, many others.
Local capital matters. Local mentors matter.
That was my original idea behind Launchpad LA. I figured if we couldn’t fund every company locally we should at least embrace them as a community and show that we’re willing to mentor them whether they raise their money in town or not.
So what can a community do?
I often point out the story of when we raised our fourth fund a few years ago. I went to see several LP funds in Boston. At least twice I had conversations that went like this, “Yes. It’s true. Your fund performance has been great. But there’s also several great funds in Boston and while our first priority is to returns we have an equal responsibility to local funds and local jobs.”
LA public pension funds and endowments have historically been the opposite. I think government and community members need to understand that capital formation is an incredibly important part of economic revival. People often say, “Great entrepreneurs will build a community and the capital will follow.” I don’t see much evidence of that. I think it’s a combination of the two. It’s clear capital with no talent ends up having to travel to do deals. But talent with no capital is another word for migration.
And then there is public policy. Historically the City of LA has been hostile to startups. I’m reminded of LegalZoom who was founded in LA but moved it’s headquarters to Glendale and much of its operations to Austin, Texas. While LA was trying to impose archaic taxes on the firm and seemed to care less about its existence since it was a “startup” – the first lady of Texas welcomed them to Austin by picking up the CEO at the airport on his first visit there. It’s no wonder hundreds of jobs migrated. Luckily since then we elected Mayor Eric Garcetti who understands the importance of startups and of technology and venture capital on job creation.
But we still need more funds. No – I’m not worried about the competition. We’ll win our fair share of deals. But when you remember the Snapchat effect you see that I gain even from the deals we didn’t get to do. I’m guessing the future leaders of Lookout will build companies in the Bay Area.
Communities can make a difference. I wrote about the awesome efforts of Cincinnati to stimulate its startup community and the role of Paddy Cosgrave in Dublin, Ireland as well the entire Irish business community, the IDA, etc. who woo businesses to put their headquarters there. I also covered the impact of Brad Feld in Boulder or Fred Wilson in NYC as observed from my keynote on a trip to Seattle, which I felt could have a huge boom if its elder statesmen embraced startups a bit more.
Don’t get me wrong. Chicago has made strides. The Pritzker Family has been very active and the opening of 1871 as an entrepreneurial hub is a great example. But my conversations with countless Chicago entrepreneurs suggests it has similar issues to all non-Silicon Valley centers: not enough venture capital, too few tech angel investors, not enough talent for product management or engineering, not enough local tech powerhouses to drive local biz dev / keiretsu. I think this is true of LA, NY and many other tech communities so I’m not singling out Chicago.
My point is this … cheerleading isn’t enough. We need to help create local venture capital funds who may be national in investment strategy (as we are) but who will do more than their fair share of fundings locally (for us that’s 50%). Fund formation + local mentors + local talent = a shot at creating successes that drive the future job growth of our great cities.
This post originally appeared in Both Sides of the Table on November 15, 2014.
Wednesday, November 5th, 2014
Here’s a unique take on the time lapse genre the creator labels “layer lapse.” Boston needed some love in this genre anyway. If the video doesn’t display for you, click over to Vimeo.” h/t Peter Brassard
Tuesday, September 17th, 2013
[ Urbanophile reader Andrew Zimmermann sends us this tale of change in Somerville, a suburban town near Boston – Aaron. ]
Urban planners have long cast the artist and gay/lesbian communities as urban pioneers and harbingers of gentrification. We’ve heard the stories of North Halsted in Chicago, the Pearl District in Portland, the South End in Boston and Soho/Chelsea in Manhattan. But, ever since hipsters became part of the sub-culture lexicon, urban experts have blamed gentrification on them. From Williamsburg, Brooklyn to the Mission in San Francisco hipster havens have continued to demonstrate that gentrification isn’t limited to the artists or gays (although I’m not sure there is much of difference). The latest installment, not to anyone’s surprise in the Boston area, is Somerville, which was the subject of a recent piece by Beth Teitell in the Boston Globe.
Somerville’s back story is what you would expect of a turn-around tale in urban terms. Inner Ring suburb – check. Architecturally rich yet deteriorated housing stock – check. Mass transit connectivity – check. Cheap rents – check (well not anymore). Walkable, dense urban neighborhoods – check. Enter artists, gays but more overwhelmingly, hipsters, or so portends the title of the Globe article “Somerville worries it’s growing too hip”. Somerville is noteworthy however in a couple ways. First, it is the densest city in all of New England, almost exclusively achieved through low-rise residential housing types – think triple deckers, condos and townhomes. Second, local government has proved not to be a hindrance, instead turning it from a crime ridden place known as “Slummerville” to among the state’s best run municipalities. The schools however have a long way to go (we’ll discuss later).
As the story points out if gays, artists and hipsters are the first adopters, it won’t take long for the effects of gentrification to show themselves through drastic changes to the retail sector and the good ol’ barometer of choice, housing prices. Let’s take a look at both, since the retail and real estate sectors approach gentrifying neighborhoods much more systematically than do our hipster friends.
If you’ve visited Davis Square recently, you know that the retail landscape has changed drastically in the last decade. Walgreens and Starbucks are among your anchor tenants. The food and beverage offerings have gone from cheap working-class linoleum floor eateries to upscale bistros and kitchens and cantinas. Alfresco’s, a modest Italian restaurant got rebranded as M3, a “concept in southern dining” replete with catfish, chalkboard paint tables straight from a Pinterest board and plenty of canned beer you’ve never heard of. Likewise, the Painted Burro, which calls itself a “Mexican Kitchen and Tequila Bar”, expanded in less than a year into the space occupied by Spike’s Junkyard Dogs – a blue collar, fluorescent lit hole in the wall. It won’t be missed – and no you still can’t get a table midweek at the “burro” without a reservation. That doesn’t even begin to describe the explosion of fro-yo shops in Davis which saw its count jump from zero to three in the last year. Even if the new smell wears off, as Teitell’s article depicts, top local chefs are elbowing their way into Somerville to be part of the action.
Elsewhere in town, the loveable loser Johnny Foodmaster grocery chain has been supplanted by Stop & Shop and Whole Foods. You don’t need to be from Boston to know that when Whole Foods takes over for any grocer, things they are a changing. The fact that national behemoths like Starbucks, Chipotle, Pinkberry and Whole Foods are betting on Somerville is telling of what stage of gentrification the city is now experiencing. If retail is said to follow rooftops, then clearly retailers are paying attention to who is underneath those rooftops. Somerville’s population has largely remained static while its demographics have changed considerably. It’s now home to the second largest concentration of 24-35 year olds in the country – a Neilsen analyst’s version of shooting fish in a barrel.
Population hasn’t changed since 1980 – but WHO composes that population has.
It wasn’t long ago that “Slummerville” was a moniker real estate agents had to overcome when selling homes in Somerville. The days of getting bargains in town have largely disappeared as developers have chopped up large three story homes into condos and townhomes that routinely sell for $500/sf or more. Hipster populations in Somerville’s Davis Square have migrated within city lines to places like Union Square, Magoun Square and East Somerville. Even with a red-hot real estate market in greater Boston, Somerville remains white hot.
Red Fin reports a 103% sale to list ratio with a median home price of $470,000 and an average of 28% down in the second quarter of 2013. Clearly its not 24-35 year old hipsters putting down an average of $131,000 to claim of piece of Somerville as their own. White Collar professionals and families are among the early late majority that are betting on Somerville just as much as Starbucks and Whole Foods are. The loss of affordable housing and diversity would be lamentable if it weren’t so inevitably predictable. It’s not as if riders of fixed gear bikes wearing skinny jeans have disappeared, they just have to dodge baby strollers on the sidewalks and VWs, Mini Coppers and Audis in the streets.
Davis Square and Inman Square are no bargain any more.
Lastly, all the kids in strollers will need a place to attend school someday. If only Somerville were that place. SchoolDigger.com recently rated the city 299th out 325 school systems state wide. For all the progress Mayor Joe Curtatone has made, he’s clearly focused on the early adopters and the hipness of the city, with the schools as a longer term project. It might be sensible, but he and the city are running out of time. The Wellesleys, Newtons and Miltons might lack hipsters or artists or gays but they have a leg up on schools, an advantage suburbia has always had over the urban core. Undoubtedly its schools will have to do better and they will as gentrification will lead to higher standards, be they in the retail, real estate or city services sectors.
Somerville finds itself (by definition a suburb, yet still a city) in an interesting position as the effects of hipness and gentrification point to seemingly distinct paths. One is like other hipster havens in Brooklyn or Wicker Park – places that have retained a shade of the counterculture tendencies that define hipster identity. Two is like mature urban inner ring suburbs, Brookline and Cambridge being two local examples. The latter can claim to be cool but lack the authenticity of Somerville’s creative culture. The former over deliver on cool and trendiness and priceyness but because they are neighborhoods within New York and Chicago (or any large city) respectively, under deliver on the city services that suburbs provide. Whatever happens, the hipsters likely won’t be a permanent part of Somerville history as it’s usually the politicians or the wealthy elite of any given place that decide its fate. For now the trendy capital of Metro Boston can pat itself on its plaid-clad back, and keep its beanie cap-covered-head high. See you at Chipotle.
Andrew Zimmermann is an architect and urban designer with NBBJ, a global architecture firm with a presence in Boston. He lives in Somerville’s Davis Square with his wife and occasionally writes about design, real estate or anything that he finds interesting on www.zimmswhim.com.
Thursday, March 14th, 2013
Rolls-Royce Logo on Building in Downtown Indianapolis. Photo courtesy Gary Glover.
While driving up and down Boston’s Route 128, I’ve often noticed the various tech company logos that adorn the office buildings – Oracle, SAP, Adobe, etc. Interestingly, most of the ones that catch my eye aren’t Boston area based companies. Yet the presence of these blue-chip tech names on the buildings reinforces in my mind that Boston is a tech center.
I had a similar thing happen when I was in Indy last fall. Rolls-Royce – which actually manufactures aircraft engines, not cars, but is definitely an elite global corporate player – has its North American headquarters in Indianapolis. They had recently moved their offices to downtown and installed their logo on the building, a low rise office on the southern edge of downtown. Driving into downtown Indianapolis and seeing a giant Rolls-Royce logo, whatever wrong impressions about product it might generate in the public mind, is still a pretty powerful statement.
By contrast, the various office buildings ringing Indianapolis along its I-465 beltway sport a largely unimpressive collection of signs for various local and regional brands: law firms, mortgage companies, that sort of thing. There’s very little to make much of an impression on a visitor that this town is a major center of much of anything.
Lots of things that we take in as we look at cities help define for us what the place is all about and where it stands in the pecking order. Though they may give very false impressions about a place, for good or ill, the brand prominence of corporate logos displayed on major office buildings would appear to be one of those things that shapes our opinions of what a city is really like.
Tuesday, November 6th, 2012
[ George Mattei is a long time reader and frequent commenter on the blog. I find his comments are very insightful. One in particular really caught my eye and I asked him to turn it into a full blog post. Thankfully he said Yes so here it is – Aaron. ]
How Physical, Cultural and Political Differences Shape Development and Economic Growth
I was recently asked to make a comparison living in New England versus the Midwest-specifically how cultural and political differences impact the economic and physical development framework of the two regions. This is something that I have at least a modest knowledge of, given that I have lived and worked in both areas (Born and raised in Hamden, CT near New Haven, attended college near Boston and now live near Columbus, OH). As a real estate developer and planner specifically I have paid quite a bit of attention to these differences.
I moved to Columbus from Connecticut nearly 15 years ago to attend grad school. I must admit the cultural differences between these two areas were a bit surprising at first. The basic differences were obvious-different land development patterns, different industries and even different landscapes. However, after living in Ohio for several years, I came to understand on a personal level the cultural and political differences and how they have -and continue to- shape and form these regions.
These differences show up in subtle ways that are also telling. In New England, my experience was that residents have a much more territorial, parochial view of their communities, and are more likely to resist change and development. In contrast, in many Midwest metro areas the residents have a more metro-focused view of their region, and better understand how the different communities interact. This does not mean that they always cooperate, but by nature some of the governmental functions are already done on a regional basis, making it easier to collaborate on certain tasks and be more open to change.
It’s perhaps deceptively simple, yet revealing, to pick a typical resident in a community in each area, ask them a simple question, and read into their response. Let’s pick two fairly standard metro area cities – Hilliard, OH and Attleboro, MA – and compare them on several levels. First some background information.
Hilliard is a suburb about 10 miles northeast of Columbus that was founded as its own small railroad community in the mid 1800’s. It had less than 1,000 people until the 1960’s, when it began to grow exponentially with the construction of the I-270 outerbelt around Columbus. Today it is a middle to upper-middle income community of about 28,000 residents sandwiched between Columbus, other suburban communities and the rural farm fields of western Franklin County.
Attleboro, MA is a city about 10 miles northeast of Providence, just over the border into Massachusetts, and 30 miles southwest of Boston. It was founded in the late 1600’s and steadily grew in population to the nearly 45,000 people it has today, but was a community of about 25,000 people in 1950 prior to the time when it would have been absorbed into the larger metroplex. It is now part of the Providence Metropolitan area, located right on I-95 between Boston and Providence, and is also linked to the two via the MBTA Boston-Providence commuter line. It was once known as the “Jewelry Capital of the World” due to the presence of several jewelry manufacturers in the city in the early 1900’s. Today Attleboro has transitioned from a manufacturing-dominant self-contained city into a quasi-suburban middle income community that has melded into the surrounding metropolis.
Now that we have a background on the two communities, let’s pose our simple question from someone unfamiliar with these areas-“Where are you from?” The answers each give would be subtly different, but telling in how they view their community and its relationship to the surrounding region. From my personal experience, here’s how each resident would answer this question:
Hilliard: “I’m from Columbus Ohio.”
Attleboro: “I’m from Attleboro, MA.” (Sometimes, they will abdicate this and say “I’m from Massachusetts”, but that’s just for convenience so they don’t need to go into a lengthy description of where Attleboro is).
The differing level of detail reveals not only how they view their community, but allows us to look at where these views come from. Clearly the Hilliard resident considers him/herself more a part of the metropolitan area. The Attleboro resident sees him/herself as a resident of the town first, and then the State, with no mention of the metro area.
Why would this be? There are several physical, cultural and political factors that play a role:
1. Municipal Borders. Municipal borders in New England were fixed long ago, well before metro areas became the main economic unit. In much of the rest of the country, including the Columbus area, communities continue to change their boundaries through annexation (more on the legal aspects of this in a moment). The borders of New England cities and towns were fixed hundreds of years ago and have rarely changed since.
2. Proximity of Metro Areas. New England has numerous small (except Boston) metros that bump up against one another. As a result, you get an agglomeration of established communities that sit between metro areas. In the Midwest, communities are spread farther apart. In Ohio, a state with several metro areas, many counties still have a modest sized county seat and a few villages. There is still quite a bit of country between many of the metro areas, and the spacing gets farther as you go west into other states.
In our example, it’s pretty clear that Hilliard would still be a small village of less than 1,000 people if Columbus hadn’t sprawled out to meet it and envelop it within its metro footprint. Many residents probably work in Columbus, and the ones that don’t work in one of the other suburban communities that owe their growth to Columbus, just as Hilliard does. When residents want a night out on the town, Columbus is the only game in town without a long trip.
Attleboro is a different case. It was a small city in its own right before it ever became part of a larger metro area. It sits 10 miles from Providence and 30 from Boston, and probably has many residents that work in both cities, plus in several other suburbs in the area that have the same fractured allegiance to multiple metros. Cultural opportunities abound in both cities, which can result in many visits to both.
3. Small Box Government. Although both regions tend to have a “small-box” governmental structure, it is actually far stronger in New England than in the Midwest. This is codified in the governmental structure of the areas in numerous ways:
a. First, New England “towns” are essentially the equivalent of “townships” in other parts of the country. However, there are significant differences. In Ohio, townships are considered semi-autonomous extensions of the County government. They are not incorporated as their own municipalities. They are run by their own elected officials, but have only limited powers as delegated to them by the Ohio Constitution. In legal-speak, they are not full “home rule” governmental entities. For example, townships can have zoning (if they jump through certain hoops), but they cannot approve subdivisions-that’s a County function. Incorporated municipalities in Ohio are full home-rule entities.
New England towns are also not incorporated. However, this is a virtually meaningless designation. They do have home rule, and function in virtually every way just like an incorporated city. They cannot be annexed by a city. A friend of mine that’s heavily involved in my home town’s local government once said to me, “we looked into incorporating ourselves as a city, but it didn’t mean much and required us to pay higher fees to the State.”
b. Speaking of counties, New England has a fractured form of county government. Connecticut, Rhode Island and Vermont do not have any county governments, only lines on a map. Massachusetts has abolished some counties, while some having merged and other still function independently. Only New Hampshire and Maine have what appear to be fully operational county governments. In areas without counties, each town or city provides most of its own services. For example, in Connecticut, each town has its own elected clerk that just handles document recordation in that town. Only services that absolutely can’t be run on a local level are done regionally, such as the judicial system-however this is run by the State via districts that roughly correspond to the county boundaries.
In the Columbus area, each county has a robust governmental structure that provides a number of services that are more easily provided on a regional level, such as courts, auditor and recorder and Sherriff services. In Indiana, their Unigov system merged the City of Indianapolis and Marion County to even further expand the box.
c. In Ohio, Townships can also lose land to municipalities that swallow up territory through annexation. The City of Columbus essentially controlled development in Central Ohio for 50 years through buying up the water and sewer systems and only agreeing to provide service to developers if they annexed to the City or a suburb with which the City had an agreement in place. This was a “big box” approach that was put in place in the 1950’s, and has worked well for Columbus over the years. In New England, the borders were fixed a few hundred years ago, and they don’t change-only “small boxes” available.
4. Population Density. New England is more crowded already than many other parts of the country. This furthers resistance to new developments, resulting in higher real estate prices. This, along with the lack of economic activity that would draw many new residents to the area, means that-outside of Boston- many New Englanders were born and raised there. Not much fresh blood to re-think the way things are done.
5. Local Taxation. The manner in which local taxes were levied in Connecticut is very different than in Ohio. In Ohio, income tax (charged where you work, not live) funds much of the local revenue for cities and townships, with property taxes going to fund school districts which are operated as separate governmental subdivisions. In Connecticut, property taxes support most of the local level spending, so property value is king. In a majority (although not all) of the communities the school district is only semi-autonomous and is funded directly as a line item in the municipal budget.
The impact of this is actually quite dramatic. In Ohio it pays to cram as many jobs as you can into your community. Many communities welcome every office, strip mall and warehouse they can get. In Connecticut, many people tend to react the opposite way-they don’t want these uses. They bring traffic and pollution, which can bring property values down (at least that’s the fear), thereby weakening the municipal coffers. Exclusivity pays when keeping out more intense uses to preserve the bucolic countryside atmosphere leads to wealthy residents building large estates that pay lots of taxes. There is likewise much less of an incentive for local leaders to welcome the newest strip mall into their community, especially when they need to provide more police services and bigger roads. In Ohio, almost every highway exit, even the ones in high-end communities, has several commercial establishments near them. In Connecticut, many exit onto leafy drives that run to quiet residential areas.
6. Terrain. Physical landscape plays a role-if you get 20 feet off the ground in Hilliard, the Columbus skyline is in full view, due to the flat terrain. I guess that it would take a much higher point to be able to see Providence from Attleboro, given the rolling terrain. Out of sight-out of mind.
7. History New England has a very rich history. Pilgrims, founding fathers, settlement in the 1600’s, historic town centers, fishing villages, former industrial powerhouses, Ivy League universities – all of these things contribute to a culture where the past is revered. Here in Columbus, people’s self-worth is in the future. It’s a young, relatively anonymous, but up-and-coming city. It has a history, but most people don’t hang their self-identity hat on it (in fact, I would argue that there is an unhealthy self-angst about Columbus’ past by its residents). Many other Midwest metros also have a slightly older history characterized by the manufacturing boom in the early 20th century-which is still within the memory of many of its residents, and so doesn’t hold the gravitas of New England’s founding fathers.
We can now go back and look at why our two residents answered our question the way they did in the context of the above differences. The Attleboro resident answer Attleboro for two overarching reasons-1) they have more than one metro area with which to identify and 2) the historic, political and physical geography of the area fosters an overreliance on the city/town as the dominant cultural, political and social institution in the region. The Hilliard resident answered Columbus for exactly the opposite reasons-1) Hilliard clearly falls within only the Columbus metro area and 2) there is no dominant physical and cultural reason, and much weaker political reasons, to answer Hilliard to someone else.
Cumulative Effect on Regional Culture
The cumulative result of these cultural, physical and political structures is a significantly different approach to development, both physical and economic. New England has a much stronger resistance to change. Why would a community that prides itself on its historic past want to demolish some of it to build new, modern facilities? They don’t. Even in Boston, the economic powerhouse of the region, many people still deride the skyline as “turning Boston into New York”. Their true pride is placed in the Back Bay, North End, the Commons, Southie, etc.
This also extends to greenfield development. While many areas have residents that resist change, New Englanders have a particularly powerful argument-the history of place. After all, the heritage of the area is small, dense nodes with pastoral, rolling hills in between. A colonial-style home on a 10-acre exurban lot preserves much of that look. A relatively dense subdivision of 4 units an acre does not. Local officials tend to listen to this argument more in New England than in other parts of the country, because their self-worth is strongly tied to their history and their tax base to property values.
Even in a loss, the impact on the local psyche is not as significant. When UPS moved their offices out of southwest Connecticut in the early 90’s, no one felt like the true character of the region was threatened. Sure, jobs were lost, and that was hard, but it didn’t make the region any less proud of itself. Contrast that to many Midwest metros, who keep a scorecard of Fortune 500 companies in their pocket to show outsiders, and who feel real reputational angst whenever a company leaves.
Furthermore, the “small box” view tends to stifle larger economic development goals that would be beneficial to the region as a whole. Today it’s virtually impossible to get an even modest expansion of the obsolete Tweed-New Haven airport, for example, even though it sits in the middle of one of the largest underserved air markets in the nation. It straddles the border of two municipalities that fight over it incessantly (to be fair it is near a number of single-family neighborhoods). Meanwhile many Midwest cities have actively expanded their airports to nurture these crucial links to the external economy.
Without new greenfield development and modern buildings, airports and other facilities, it can be difficult to attract new companies to the area. The communities in New England that do have a number of these newer facilities (such as those off of the fabled Route 128 near Boston) often have them because their sense of history was ripped apart by the momentary fervor for building interstate highways in the area-one which has faded in New England but which still runs strong in the Midwest. Midwestern cities still develop scads of suburban office buildings and shopping centers-often too many- while the relative dearth of development in New England results in some markets being highly overpriced relative to other areas of the country. Surprisingly, although Boston has a very dense core, the area around the I-495 outerbelt (one of the largest outerbelts in the nation) is only very thinly developed in many areas.
Beyond the development aspect, New England has a regional mindset that is from my experiences fairly unique. In some ways the Northeast, with New England as a part of that area, is worldly-a gateway to America, home to several large world-class cities, a history of immigration and a density that make this region feel busy, prosperous and cosmopolitan. It often sets trends that the rest of the world follows.
On the other hand, it is also a region of small boxes, one that lives in the past as much as the future and one that resists change fairly aggressively. The view is not forward-looking in many cases. It’s somewhat inward-looking. The identities are fragmented and parochial. The bottom line is that outside of a few business cluster locations like Cambridge or Wall Street, or a few high-society locations like the Hamptons or Greenwich, the Northeast doesn’t want to necessarily be a trend-setter, even though it often is. It’s not that interested in climbing the ladder to “world class” or the “big time”- partly because it thinks it’s already there, but partly because it would have to sacrifice part of its identity. It’s just fine with its leaf-strewn rolling hills, historic downtowns, fairly moribund economic performance and proximity to world-class New York and Boston.
As a final note-it may sound that I am bashing this mindset. I don’t necessarily think it’s all bad. I do believe that New England could do more to promote more job growth and think regionally about its future. Some forward, big box thinking here would be welcome. On the other hand, not many places in America have the rich history and scenic beauty that New England has, and this is exactly the kind of “authentic brand” of which Aaron Renn has spoken so often of late. Indeed, tourism has become a big part of the New England economy over time as many people recognize this brand and want to experience it for themselves. Artists, authors and creative types, at least the highly successful ones that can afford it, tend to flock to the area to live and work in relative seclusion and anonymity. This lifestyle, in my opinion, should be preserved and nurtured in a nation where so many places do seem like every other place.
Sunday, October 21st, 2012
I was honored to speak at a conference in Milwaukee over the summer called Milwaukee’s Future in the Chicago Mega-City. Chicago and Milwaukee are about 90 miles apart on I-94. There’s an Amtrak link that makes the journey in about 90 minutes. The two cities have been sprawling such that there’s now more or less continuous development along the lakefront between the two cities. Milwaukee has been a challenged city economically and demographically. Chicago has had its own serious problems, but has seen its already muscular core boom in terms of residents and investment. High end business seems to be doing well in Chicago, and the city gets pretty good press nationally.
If you are Milwaukee, the idea of somehow tapping into Chicago naturally presents itself. Local leaders clearly see Milwaukee’s future as, if not a giant suburb of Chicago, at least a city for which Chicago’s cachet and prosperous zone somehow provides them with a leg up. As Richard Longworth put it, “Once an independent economic power of its own, Milwaukee now belongs to Greater Chicago.”
The notion that proximity to Chicago or another mega-city* represents an unambiguous good seems nearly universal. While the mechanics and value basis of greater collaboration are often illusive, it’s assumed that such value must be present and such collaboration desirable. Not just Milwaukee, but places like South Bend, Indiana and Grand Rapids, Michigan look towards Chicago as an economic engine for them.
But what if it this is actually backwards? What if proximity to Chicago or another mega-city is actually a curse, not a blessing?
My friend Drew down in Indy has a model of this, clearly targeted as his own city but relevant to the discussion. He says that the Midwest is like a solar system with Chicago as the sun. As he see is it, Indianapolis is Earth – it’s the perfect distance from Chicago. A place like Cleveland is too far away – it doesn’t get enough heat and light. But Milwaukee is like Mercury – it’s too close to the sun and gets burned up.
I suggested at the conference that one reason Milwaukee should want to active engage in shaping the interaction between the two regions is that the natural development could actually be negative. I had in mind here Providence, which is in a similar situation. Providence is 50 miles from Boston – that’s closer than Milwaukee is to Chicago, but Boston is also smaller than Chicago. Like Milwaukee, there’s a rail connection between the cities, with commuter service taking a bit over an hour.
Providence, like Milwaukee, has struggled. In fact, it’s struggled far worse. Sticking with solar system thinking, my immediate gut take here has been that Providence is a brown dwarf of a city. Maybe at one time it generated real economic life force, but today is a shell of a metro region in many ways.
Another similar example is New Haven, Connecticut, which is about 80 miles from NYC, and is a notoriously troubled city. And even being in the same state hasn’t helped Springfield, Mass at 90 miles from Boston. It too has struggled.
Is this actually the pattern? Is proximity a negative indicator not a positive one? Does proximity drain vitality instead of creating it? Let’s consider further.
I believe a lot of the thinking that being close is positive comes from the example of two very successful twin cities: Dallas-Ft. Worth and Minneapolis-St. Paul. Two things jump out at me about these, however. One, in both cases the cities are significantly closer than Milwaukee and Providence are to Chicago and Boston. Dallas is about 35 miles from Ft. Worth. Minneapolis and St. Paul actually abut each other, and the downtown-downtown trip by freeway is 14 miles. These actually are part of the same metro area by any standard.
Two, the cities in these cases are reasonably balanced in size. Dallas is bigger than Ft. Worth and Minneapolis bigger than St. Paul, but it doesn’t have the feel of the vast disparity of say a Chicago vs. Milwaukee. Indeed, the difference is clear in how we compare the cities. With a Chicago and Milwaukee, metro area seems the way to go, but with the others municipal population seems a reasonable proxy.
Another positive example might be Washington-Baltimore. The distance here is about 40 miles. These are separate metros, but overlap considerably and could potentially be combined. Also, Washington is only about twice as big as Baltimore, which is pretty hefty in its own right at 2.7 million people. Contrast Chicago at over six times as big as Milwaukee and Boston at almost three times as big as Providence, a number I think is understated since part of Southern Massachusetts that’s in Providence metro arguably has a strong Boston orientation as well. In any case, while the city of Baltimore remains infamous in many ways, the overall metro area has done well.
So the idea that proximity is a positive could have originated in models that aren’t applicable. Being close works: but only if you are really, really close – say about 40 miles or better – and your size ratio is no more than about 2:1.
Or maybe the latter might not even be necessary. There are a few examples of old industrial cities turned into suburbs in Chicago – Aurora (41 miles), Elgin (42 miles), and Joliet (44 miles) being the prime examples. These were once independent cities of sorts, and now are clearly suburbs. They aren’t nirvana yet, but proximity to Chicago has clearly invigorated them to a certain extent. The size ratio vs. the overall Chicago region or even just the city would obviously be huge. So perhaps the only question is whether you could plausibly be a true suburb.
Interestingly, Detroit and Ann Arbor fit this and are only a bit over 40 miles apart, so also follows this rule. It may seem ludicrous to credit Detroit with injecting life into Ann Arbor, but I don’t think it would be as successful if it were isolated in the middle of the state. (Madison, Wisconsin succeeded on its own, but is a bit bigger and also the state capital).
But it may even be worse than this. Back to my provocation a few paragraphs back, is it possible that not only does anything other than true suburban style proximity not help you, it might even hurt you? The examples of Milwaukee, Providence, New Haven, and Springfield suggest it’s at least possible. Now all of these are post-industrial cities that have clearly struggled for reasons other than proximity to a mega-city. Many similarly situated places (or even more badly troubled ones) are not near a much bigger city. But it’s worth considering the point.
I hypothesize about it in terms of attempting to reboot a high value economy. If you are a high value business – say a biotech startup or some such – looking to locate in New England, why would you ever pick Providence over Boston? You wouldn’t – not unless they paid you a ton of money a la 38 Studios (a Curt Schilling backed video game company that went bankrupt after receiving $100 million in loan guarantees from Rhode Island). Not only is Providence itself an expensive place to live and do business, it’s talent and ecosystem disadvantaged. Why subject yourself to that when you can move 50 miles up the road to one of the world’s premier innovation areas? The kicker is that this applies to business ideas in Providence as well. You can launch your business in Boston and still basically stay where you live.
I’m not a believer in the oft-repeated claim that these tier one cities are sucking all the talent out of smaller places. The numbers don’t back it up. Chicago has the second highest college degree attainment among large Midwest cities, but at 34.2% hardly towers over other regional cities, most of which are at least in the 30s, including Milwaukee. And Chicago’s growth in population with degrees is actually in the bottom half of large Midwest metros.
However, perhaps there is a “dead zone” of sorts around mega-cities. This zone extends from the edge of their suburbs to some unknown outer radius. In that zone, perhaps black hole like, high value functions really are sucked into the mega-city. Or perhaps negative aspects of the mega-city like traffic and pollution act like kryptonite on the economy of cities in this zone. I don’t know for sure. It’s just a hypothesis to consider based on a few observations. I would love to see some research done into this. In the meantime, small cities near a very large one shouldn’t be too quick to celebrate their location as boon.
Update: Somebody mentioned Philadelphia in the comments. I’d forgotten that it was only about 90 miles from New York. I think it’s a great example. I do think some of the uptick in the city of Philadelphia can be attributed to its location on the prime NYC-DC axis, and NYC proximity especially with fairly rapid train service has created a sort of sixth borough effect. But, Philadelphia is basically a mega-city in its own right. It has a large, dense, urban core with great transit, etc. I’d argue that given those assets, Philadelphia has really underperformed peers. If you look at other cities like that – New York, Chicago, Boston, and San Francisco – they have all had a massive transformation of their urban environment and economies. Philadelphia has not. I can’t help but wonder if proximity to New York is part of the reason why. If Philadelphia had switched places geographically with Chicago, where it was the capital of a huge region, I can’t help but think the city would have experienced that massive transformation and would be seen in the public mind like a Chicago is. So perhaps in Philly’s case, proximity has both hurt and helped.
* I use the term “mega-city” loosely to refer to a tier one type American city, not specifically as a region with greater than 10 million residents.
Tuesday, September 11th, 2012
[ If you didn’t read Stephen Smith’s two great recent pieces on why US transit costs are so high over at Bloomberg, you should check them out now. See: US Taxpayers Are Gouged on Transit Costs and Labor Rules Snarl US Commuter Trains. He also writes over at Forbes and the great blog Market Urbanism, which takes a free market view of boosting cities. He followed up on these pieces with this one talking about Amtrak. I hope you enjoy – Aaron. ]
First order of business: I wrote two articles for Bloomberg View (the opinion counterpart to Bloomberg News) on the high cost of US transit – one on private-sector gouging, and one on public-sector gouging.
Secondly, I’ve been talking to former Amtrak president David Gunn a lot recently – at first for the labor piece I just linked to, but the conversation has veered into other topics. (If you have any burning questions you’d like answered, leave them in the comments.)
The other day I got around to asking him what he thought about Amtrak’s $151 billion proposal for the Northeast Corridor and the $7 billion Union Station plan.
His verdict? “It’s all a f—in’ pipe dream.”
His response was basically that big, flashy plans never work out, and that the only way to get things done at Amtrak is to do them under the radar.
He used the rebuilding Amtrak’s Harrisburg line from Philadelphia to Harrisburg as an example. The Harrisburg line (the eastern half of Pennsylvania’s original Main Line) is the most important stretch of tracks that Amtrak actually owns after the Northeast Corridor, so I think there’s a lot to be learned Corridor itself.
Here is my transcription of what he said about rebuilding the Harrisburg line. Most parts are verbatim, but there are a few sentences that I wrote from memory, and a few things that I probably missed.
The Harrisburg line was a wreck. From Paoli on in [towards Philadelphia – i.e., SEPTA’s most important regional rail line], it was a bad 60 mph railroad, and from Paoli to Harrisburg it was a bad 70-80 mph railroad. The signals were ancient, the track was rough, trees were brushing up against the cars, weeds were growing on the ballast.
I rode the line with a fellow who’s got a private car, and we were handling it on one of our trains. I was embarrassed. Being a railroader, you want the railroad to look good, you want the ditches to be clean, the ballast to be clean. This stuff’s important – it’s not just for looks.
I got back, and I said, what the hell are we doing? I had a meeting with my operations guys – the chief engineer, the head of track, power, signals, bridges, structures, and the car guys and the locomotive guys. It was a small meeting, maybe 10 people. Plus I had my planers (who didn’t survive much longer!). I said, what the hell are we doing? It’s a good railroad – electrified, designed for 115-125 mph operation.
The operations guys said, you wanna fix it? We can fix it. I said, you come back and give me a plan for what we need in terms of rail ties, ditching, what we’re going to do with the signals (to go to electric push-pull trains).
Long story short, my guys came back and said that for $300 million, we can give you a first class, 115 mph railroad.
But the planners said, “We have to get a consultant on board!” It was a tie and servicing job – ”TNS” (?). I threw the planners out. I went to Governor Rendell, and they had $100 million set aside for improving that corridor. I said, you give me the $100 million, I’ll give you a railroad, and I’ll put $100 million of our money in. Norfolk Southern also gave us $3-4 million, because they used the tracks.
So we put it together, and I had to get approval from DOT and the Bushies [i.e., the Bush Administration people]. I never called it a program to rebuild the Harrisburg line – what I did is I went in and said, I need 50 miles of rail, 300,000 ties, this much wire, and I gotta rebuilding signal houses, etc. [might have been some more things in here that I didn’t catch].
They thought it was a lot – why would he need that many supplies, they thought? – but in two and a half years (they fired me just before we finished) we had it done. And it’s been a great success!
My point with this whole thing is, you get it done by bits and pieces. You don’t do it in these great leaps forward. Lots of stuff you can do on the Northeast Corridor doesn’t sound sexy – put high-level platforms on the lower level at DC Union Station, for example – but there’s all kinds of things your an do to make it faster.
And for reading this far, you get a bonus! Not horribly relevant to policy, but a funny story nonetheless about his time at Boston’s MBTA:
What you find in a lot of these transit systems, like Boston, is that it’s unionized up to the very top [of management]. We used to say, “Oh, Joe, he’s got relative ability!” In other words, he’s got powerful relatives.
The T was an example of a place that was absolutely inbred, totally politicized.
I was the director of operations, and I remember one night I was out at Matttapan, I was just walking around, and I went into the little car maintenance facility that we had there for the high-speed streetcars. I walked in, and here’s the car house repairman, drunk as the lord, and I said, “What’s your name?” I said, “You’re drunk!”
“That’s right sir,” he responded, ”I’m drunk! But you know who my son is? Senator so-and-so” – state senator.
I said, “Really? You’re still suspended, and you’re going home right now!”
We suspended the guy, sent him to our AA or whatever, and when I got back to the office on Monday, everybody there said, ooooh boy!
So I got a call early Monday from the state senator, and he says, “Is it true that you suspended my father from work?”
“Yup,” I answered. “And he’s not coming back to work till Timmy O’ says he’s fit for duty.”
And the senator said, “Thank God! I’ve been trying to get his drinking problem under control for years!”
This post originally appeared in Market Urbanism on September 1, 2012.
Thursday, March 29th, 2012
My latest blog post is online over at New Geography. It is called “The Great Reordering of the Urban Hierarchy.” In it, I look at how the relentless expansion of the US federal government and the “spiky world” forces of globalizations are revamping the urban hierarchy of the top tier cities in the United States. While not a definitive view, it seems that New York is going from strength to strength, while Washington, DC emerges as America’s new “Second City.” This has been to the detriment of Los Angeles, Chicago, and Boston. It’s controversial to be sure, but I hope you’ll enjoy it. Comments definitely encouraged on this one.
Update: Richard Florida has more to say on this topic over at The Atlantic Cities..
Thursday, June 2nd, 2011
[ I ran out of Drew Austin pieces to repost from Where, but lucky for us he wrote this original that I’m sure you’ll enjoy. Speaking of which, Brendan Crain has restarted the Where Blog, which is really awesome news. This one is an absolute must to subscribe to in my opinion. So check it out if you aren’t already familiar with his work. ]
Architecture has borrowed plenty from biology over the centuries, but the reverse is less common. After observing the central dome of St. Mark’s Cathedral in Venice, the paleontologist Steven Jay Gould coined the term spandrel, describing a side effect of adaptation that turns out to be useful in itself. Like the architectural spandrel–a triangular space where two arches meet–the biological spandrel may seem perfectly designed for a certain function though it’s actually more of a lucky accident.
Today, for anyone interested in understanding cities or improving them, data on urban phenomena represent a different kind of spandrel. Much of the data offering useful clues for city planners and researchers is out there accumulating whether anyone wants it or not. The ability to track the origin and destination of every taxi trip in New York or Boston, for example, was a recent byproduct of the self-swipe credit card technology that those cities have required all cabs to install. Last year, an article in Wired described how New York City harnessed the knowledge available from 50,000 daily calls to 311, using that information to map the distribution of problems like noise complaints throughout the five boroughs. Maximizing our understanding of the city means discovering what’s already out there–the spandrels–as much as it means actively collecting data when necessary.
The taxi perfectly illustrates the opportunities these incidental data sources create as well as the limitations of what they can tell us. Transportation is one of the trickiest and most critical problems in any city, and one of the areas where good data can help the most. By recording their own activity, taxis become sensors that roam the city painting a detailed picture of traffic conditions, travel demand, and even the locations where passengers give the best tips. We can learn a lot about the city from taxis, but we can learn even more about taxis themselves and their role in the urban environment.
It’s easy to forget, but the taxi has always been a critical form of public transportation. In cities without good transit, the taxi is often the only public transportation available. More importantly, mass transit cannot efficiently serve every type of travel that passengers demand, and the taxi is better suited to do so in many cases (think of the bus that never has more than a handful of passengers on board). Low-income city dwellers as well as the affluent rely on taxis where buses and trains don’t suffice. In the United States, where everything is seemingly built for the private car, modes of transportation that improve mobility for the carless are allies, not competitors.
Because taxis are privately operated and can’t be planned like mass transit, the opportunity they represent receives less attention than it should. Now, taxis are still private, but the rich data they generate means they are no longer the blind spot for transportation planners that they once were. We may not know exactly how to improve taxis, but we can start by deciding how they might ideally serve a city and then observing how they currently measure up to that ideal. Beginning with the principle that taxis are a form of public transportation, they should complement mass transit by filling in the gaps where transit service is less accessible, and the aforementioned taxi trip data makes it possible to see whether this happens naturally. As the maps below indicate, more taxi pickups happen where transit access is also quite good. Of course, demand is also higher near Boston’s center, and it’s difficult to say where unmet taxi demand exists (although it’s possible to infer this). As a “spandrel,” taxi data alone won’t tell us everything we need to know to answer a question like this–that is, the data collection wasn’t designed with this particular question in mind–but the more we grapple with the data, the more we learn what it can and can’t tell us, and the more useful it becomes as a means of enhancing taxicabs or countless other aspects of city life.
Friday, January 28th, 2011
[ As a follow-up to my Cost of Clout piece I am re-running this 2008 post demonstrating the important of social structures and culture to urban success. ]
There seems to be a popular belief that what it takes to create an industry cluster in bioscience or whatever is to pair research with commerce. That is, to find an academic institution doing cutting edge research, and connect it with venture capital and entrepreneurs to start companies to commercialize it. Soon enough, you have a “cluster” of businesses that takes off like a rocket. This is the perceived Silicon Valley model, and no company epitomizes it more than Google, which was started by two Stanford students to commercialize their graduate research.
But is this true? There are many top flight research universities in this country, but few major startup clusters. When major research institutions fail to generate commercial spinoffs, this is often blamed on a lack of venture capital. But is that really the case, or is something else at work?
Anyone interested in this matter simply must read AnnaLee Saxenian’s seminal book, “Regional Advantage: Culture and Competition in Silicon Valley and Route 128“. A social scientist at UC Berkeley, Saxenian lived and worked in both Silicon Valley and Boston’s Route 128 technology corridor. She wondered why Route 128, which started out with far more of a technology business and economic base than Silicon Valley, eventually lost ground to become a clear number two. She sees this resulting from the different social structures that exist in the various areas.
According to Saxenian, Route 128 suffered from a culture that was oriented towards a traditional maturing industry, not a rapidly changing one like technology. This included more deliberative decision making; vertical integration and self-sufficiency; hierarchical, centralized command structures; focus on economies of scale; a high friction job market; geographically dispersed locations; and low levels of cooperation and sparse networks between firms in the region. In other words, all the standard traits of a typical large corporation. While she doesn’t dwell on this point, it also comes across that Boston, probably due to its New England locale with all the history there, was a much more closed society. The social network and hierarchy was more fixed (the phrase never appeared in the book, but I couldn’t help but think Boston Brahmin) and the process of establishing trust and credibility much slower than California. While famous as one of the bluest states, Massachusetts is socially conservative in many ways, and highly risk averse. This is the land of the suit and tie, and the difference between that environment and California casual was more than just a surface thing.
Silicon Valley, of course, was just the opposite. It adopted social structures that were very focused around innovation and time to market. It was open, with rapid, decentralized decision making. Firms quickly specialized, focusing on their core competency, and established close links with suppliers to fill in the rest of the value chain. These links were often such that it was not clear where one company ended and the other began. The clearly functioned on high degrees of trust. Even direct competitors often talk to exchange ideas and help each other solve problems. Here’s a quote:
Competitors consulted one another with a frequency unheard of in other areas of the country. According to one executive: ‘I have people call me quite frequently and say, “Hey, have you ever run into this one?” and you say “Yeah, about seven or eight years ago. Why don’t you try this, that or the other thing.” We all get calls like that.’ (33)
Clearly this is quite unique. I’m not even sure if it’s all legal, but hey, it works for them.
The job market in Silicon Valley is extremely fluid, with people constantly changing jobs, starting companies, etc. It is expected that you won’t stay that long with any given employer. Route 128 operated on the “company man” model and to leave was to show disloyalty, often resulting in ostracism. Since Silicon Valley was a new country with almost all immigrants of one type or another, family history and credentials meant little. What mattered was whether you could perform.
Now of course it was almost entirely men, originally white men, who set this up. The tech industry is famous for being one of the most gender imbalanced. What I found particularly interesting was that many of the founders had Midwestern roots. Again quoting:
This collective identity was strengthened by the homogeneity of Silicon Valley’s founders. Virtually all were white men; most were in their early 20’s. Many had studied engineering at Stanford or MIT, and most had no industrial experience. None had roots in the region; a surprising number of the community’s major figures had grown up in small towns in the Midwest and shared a distrust for established East Coast institutions and attitudes. They repeatedly expressed their opposition to ‘established’ or ‘old-line’ industry, and the ‘Eastern establishment.’ (30, emphasis added)
The many examples of engineers with humble origins who became millionaires by starting successful companies had no parallel in the more stable social structures of the East. Jerry Sanders, founder of Advanced Micros Devices … grew up in south Chicago, the son of a traffic light repairman. (38, emphasis added)
To digress for a moment, remember how I said the contrarian, ornery Hoosier/Midwestern attitude is, in the right context, a huge strength, not a weakness. This shows that in action. These guys didn’t toe the conventional wisdom line. Instead they created a whole new business model. I’ve got to believe the Midwest mindset played a huge role in making this possible. The unfortunate thing is that they had to leave the Midwest to do it. Imagine if they’d stayed home and made it happen around one of the great engineering schools there? Alas, to this day Midwesterners often have to leave to turn things into reality. Famously, Marc Andreessen had to leave Illinois to start Netscape, and in fact had U of I actively hampering him all the way. If the Midwest cracks the code on this piece alone, it would be a huge step in the right direction.
(By the way, for a wonderful look at how these Midwesterners invented Silicon Valley and the “elder days” of semiconductor business, see Tom Wolfe’s 1983 Esquire essay, “The Tinkerings of Robert Noyce“.)
These extremely fluid job markets, open social institutions, high trust customer and supplier interactions, and competitor information exchange create an environment of so-called “dense networks”. In a period of rapid change and innovation, these networks, by efficiently distributing information and dispersing risk, create an environment with very rapid speed to market and high levels of adaptability. A traditional Route 128 do it all yourself model simply can’t keep up with the power of this vast network.
It was this network, more than anything, that created the Silicon Valley we know today. The “cluster” we see in Silicon Valley is not an artifact of spatial co-location. It comes from the network. According to Saxenian:
Spatial clustering alone does not create mutually beneficial interdependencies. An industrial system many be geographically agglomerated and yet have limited capacity for adaptation. This is overwhelmingly a function of organizational structure, not of technology or firm size … The current difficulties of Route 128 are to a great extent a product of its history. The region’s technology firms inherited a business model and social and institutional setting from an earlier industrial area. (161-162).
Sound familiar? It describes the Midwest perfectly. What I find interesting is how Saxenian illustrates her thesis not using a struggling Midwestern burg as a case study, but rather Boston’s Route 128, the second largest technology hub in America, home to possibly the greatest collection of universities in the country, with massive access to capital, etc. If this town had its problems, how much more so places without those advantages? It certainly shows the scale of the challenge in building industry clusters.
Obviously, changing the social structure, culture, and institutions of a region is difficult to do. Even positive articles highlight the scale of the challenge. I’ll refer a recent article on Milwaukee startups that I linked that quotes a local businessman saying, with some pride I gather, “Milwaukee is a one-strike-you’re-out town.” That’s not a good thing. Silicon Valley shows that failure and risk taking are good. The way to innovate is to figure out how to try lots of things and to fail quickly and cheaply. If you are overly concerned that you’ll be permanently ruined if your business goes bankrupt, you’re not that likely to take a chance.
It reminds me of a discussion I once had with a friend from Germany. He told me, “We’re the children of the people who stayed” and bemoaned the highly conservative outlook of his countrymen. He noted the extreme reluctance to take risks because in Germany, if you go bankrupt, you’re stigmatized for life. Obvious some of that carried over to heavily German Milwaukee.
I should note that one should not over-internalize Saxenian’s case studies into some sort of cookbook solution. Every city and region needs to find its own unique path to success based on its own culture, institutions, history, etc.
I would be remiss I did not point out a few areas where I was skeptical of the Silicon Valley model. One intriguing factoid from the book was that in 1962 federal government purchases, principally defense related, accounted for over half of Route 128’s sales. Indeed, the area got its start in technology through defense related research during World War II. Could it be that dependency on government contracts is really what caused the dysfunctional culture there? Government largesse encourages rent seeking behavior at the expense of building a competitive business.
Also, Saxenian highlights how the non-business social networks in Boston substitute for the type of technology networks in Silicon Valley. But is this a bad thing? The books paints a portrait of Silicon Valley as a bunch of geeky guys who toil away long hours on tech projects and even talk about technology at the bar when they do go out. It’s like a community of idiot savants. Some might say “get a life!”
What’s more, there is some research that suggests dense networks themselves aren’t a recipe for success. In an thought provoking paper called “Why the Garden Club Couldn’t Save Youngstown” Sean Safford contrasts the experiences of Youngstown and Allentown, both small steelmaking cities. Despite similar dense networks, Youngstown failed while Allentown fared much better. His conclusion that was the dense networks in Youngstown only reinforced an already closed leadership circle who were economically aligned, while Allentown’s served to bridge otherwise non-overlapping groups.
Perhaps to a great extent, the key attribute is less the networks themselves, than the ability of outsiders and new thinking to penetrate them. Silicon Valley’s social structure was open, Route 128’s wasn’t exactly closed, but there were barriers to entry. In a globalized world of ever faster change, the ability to respond and adapt, to process new ideas and react to rapidly shifting global forces, is critical. This puts a bit premium on dense social networks that are also open and flexible.
This is somewhat the thesis also of Richard Florida. He has a somewhat different spin, saying that the economy is now powered by the creative class, and they want to live in places that are open, tolerant, etc. This is his “three T’s” model: talent, technology, and tolerance. The last appears not to be so much valuable in its own right, but for what it says about the openness of social networks. Thus a large number of gays in a community isn’t what drives economic growth per se. Rather, a thriving gay community is a signaling mechanism that lets people know that diverse ideas and people are welcome.
I think we all know places where the social network is impenetrable. This isn’t necessarily a function of size, prosperity level, etc. I mentioned the Boston old money, social register concept. In any number of southern cities, who your daddy is, or what sorority you went to in college is a huge determinant of your place in a social hierarchy. If you don’t come from the right family, the right schools, etc., you can forget it.
Perhaps this explains my Cincinnati conundrum. Here’s a city with better assets than almost any in America, but it is one of the all time relative decline stories in US history and to this day is on a moderately stagnant, slow growth path. Why is that? There was an intriguing study I saw recently called Who Rules Cincinnati? [dead link] This is by an independent researcher named Dan La Botz, who I get the impression is some sort of hard core left activist, so keep that in mind. Nevertheless, he uses a similar approach to the Garden Club study to track social networks in the city, coming to the conclusion that officers of seven major corporations basically run Cincinnati, mostly to that city’s detriment. Another person I know offered the interesting insight that when he meets someone in a bar in Cincinnati, the first question they ask him is where he went to high school. This both indicates a highly inbred culture as evidenced by the assumption one must have gone to high school in Cincinnati, and shows that the school you attended is an important social marker. (It perhaps also shows a lack of regard for higher education).
It could be that the Midwestern cities that have the best potential for future growth are those with the most open social networks, as well as exhibiting other of the characteristics Saxenian cites. I think this would be fertile ground for social science research. It also makes me wonder if perhaps that goes part of the way to explaining the relative success of the Midwest’s larger state capitals. State capitals constantly have people traveling and doing business there from all corners of the state. This flow in and out might potentially prevent a social structure from completely congealing into a small, impenetrable elite. I sense another potential dissertation topic here.
The key takeaway is not to focus on purely the institutional infrastructure (universities, venture capital funds, labor force, etc.) when trying to set out an economic strategy. The local culture, norms, and social practices, and in particular the density and openness of the social networks is critical. Clearly, as anyone who has found themselves mired in a corporate or governmental bureaucratic organization, changing a culture is an extremely difficult thing to do. But it is something that clearly warrants an examination.
This post originally ran on July 13, 2008.