Flyover Country: Does the Midwest Need More Tech Superstars?

 

France’s new president, Emmanuel Macron, wants to create a Silicon Valley in his country. After the Trump administration dumped the Paris climate agreement, Macron filmed a video in which he called upon “all scientists, engineers, entrepreneurs, responsible citizens who were disappointed by the decision of the President of the United States, I want to say that they will find in France a second homeland.”

Now let me digress: Over lunch the other day, a trusted AEI colleague told me that Arizona is known for its strong youth hockey. This surprised me. No one is going to mistake a state whose official plant is the saguaro cactus for, you know, Minnesota. But it turns out that many NHL players retire to Arizona. This provides the state with an abundance of coaching talent and interest in the sport. So there was no grand plan to turn Arizona into a youth hockey mecca. It happened organically. More an accident of weather than anything else.

Upon hearing this, I was immediately reminded of the story of how Paul Allen and Big Gates decided to relocate Microsoft from Albuquerque to Seattle. As economist Enrico Moretti writes in his outstanding book, “The Geography of Jobs,”

The move was transformative for Seattle. In 1980, Moretti notes, college graduates in Seattle were making just $4,200 more than those in Albuquerque vs. $14,000 more today. One is considered a tech hub — Amazon is headquartered there — one is not. And as Moretti has noted, “If you look at the history of America’s great innovation hubs, they haven’t found one that was directly, explicitly engineered by an explicit policy on the part of the government. It’s really hard.” Or as economist Ernie Tedeschi tweets, “If Macron wants to create another Silicon Valley, he should get in line. We can’t even make another one here in the US.”

Along the same lines, Aaron Renn writes on the “superstar gap” over at New Geography:

The best coders are 10x as productive as the merely very good coder. The top entrepreneurs are probably 100x or or more. The presence of superstars, along with some amount of good fortune, can transform the economy of a city or region. Jeff Bezos is a superstar. Mark Zuckerberg is a superstar. Michael Bloomberg is a superstar. … And it’s not just that superstars create things, they act like a magnet attracting others. As economic development consultant Kevin Hively once told me, “When you’re the best in the world, people beat a path to your door.” To see this in action, just look at Carnegie Mellon University in Pittsburgh. CMU has the #1 ranked computer science program in the country. And companies like Google (600 employees), Uber (500 employees), Apple (500 employees), Intel, and Amazon been drawn there and set up shops around it. Ford is investing a billion dollars into autonomous vehicle ventures there. And GM also has a presence.

So based on all that, Macron’s strategy—even if it really is just a bit of trolling—may be as productive and successful as any other. Getting superstars to relocate is a sort of strategy (and taxes may matter at the margins). And Renn had a bit of policy advice for the American Midwest:

For example, one thing I don’t see in most discussion of Chicago is its lack of superstar talent. Chicago is very good but not the best in a lot of things. Where they do have arguably world beating talent, such as in their culinary industry, they shine. (I know people in New York who happily admit Chicago has better restaurants).

If I were that city, I’d be looking to see how to create a world’s best talent pool in additional particular high impact industries. Maybe the state should consider some radical type action, such as relocating U of I’s entire computer science and select engineering programs to Chicago as part of UI Labs, and putting serious muscle behind getting at least some critical subspecialities with high commerical potential to be clear #1’s in the world. … Regardless, this lack of superstar/number one type talent in the interior is a big handicap in the world we live in now. For example, just look back at a 2010 analysis Carl Wohlt did of where the people on Fast Company’s “100 Most Creative People in Business” list lived. Only six in the Midwest and seven in the South vs. 35 in the West and 32 in the Northeast (with 20 international). This isn’t a scientific survey but illustrates the scope of the problem.

Cities and states need to take a more finer grained view of talent, and understand the criticality of having at least some of the absolute best talent to kicking a region’s knowledge economy into high gear. Too many places have a superstar gap.

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  1. Seawriter Contributor
    Seawriter
    @Seawriter

    Paging anonymous. Please pick up the white phone. I think you are someone qualified to speak on this issue. Could Macron lure you to France as part of a Silicon Valley Rhone or Loire?

    Seawriter

    • #1
  2. drlorentz Member
    drlorentz
    @drlorentz

    I like the superciliousness of the title of the post: Flyover Country. It has a certain je ne sais quoi, much like Macron does. As a scientist who would presumably be in the target audience of Macron’s video, my response is bite me. I’m guessing that similar thoughts are entertained by folks in the Midwest upon hearing advice about how to improve themselves from coastal elites. But that’s just a guess.

    • #2
  3. Locke On Inactive
    Locke On
    @LockeOn

    In the late ’90s I was involved in a few consulting gigs for countries whose public policy wonks wanted to have their own Silicon Valley.  None of them wanted to hear that it took 20 – 30 years of building legal, educational and entrepreneurial infrastructure before the Valley of Heart’s Delight became Silicon.  None of them were willing to be patient – pols and burs can only see as far as the next election or budget – and none of those places has succeeded in building a strong high tech sector.

    The other advice that I and my colleagues were (futilely) giving was to figure out an economic sector where the locale was already world class, and then take the lead at driving technology into that sector.  Do it, or have it done to you.

    • #3
  4. DocJay Inactive
    DocJay
    @DocJay

    drlorentz (View Comment):
    I like the superciliousness of the title of the post: Flyover Country. It has a certain je ne sais quoi, much like Macron does. As a scientist who would presumably be in the target audience of Macron’s video, my response is bite me. I’m guessing that similar thoughts are entertained by folks in the Midwest upon hearing advice about how to improve themselves from coastal elites. But that’s just a guess.

    I’m happy in Nevada,  so Paris can’t have me either.

    BTW, I want all the tech superstars in one place too, so I can avoid them.

    • #4
  5. Franz Drumlin Member
    Franz Drumlin
    @FranzDrumlin

    Chicago has great restaurants (pity I can’t afford most of them). It has the country’s most innovative and varied theater scene (eagerly poached by Broadway and Hollywood). It has a terrific symphony, several wonderful opera companies and one of the greatest art museums in the world. Travel in any direction from downtown (itself a living museum of the best of modern urban architecture) and you will find mile after mile of verdant neighborhoods filled with classic bungalows and the sort of apartment building they simply don’t build anymore.

    However, the city and the state are ‘governed’ by the worst politicians in America. Both parties. The state of the state’s finances is almost comically venezuelan. The city has been run for decades by grasping mediocrities, almost exclusively Democrat, and the all-powerful unions worship at the altar of a cold, unyielding Status Quo. As a result you take your life in your hands if you decide to visit some of those charming neighborhoods. Chicago is one-third San Francisco surrounded by two-thirds Detroit and I give the prosperous one-third about five years before it too crumbles before the inevitable. Entrepreneurial geniuses are no match for a craven politician who smells the meat a’cookin’.

    • #5
  6. Columbo Member
    Columbo
    @Columbo

    Flyover Country

    Does the GOP need more Conservative Super Stars?!

    He’ll yeah!

    • #6
  7. Locke On Inactive
    Locke On
    @LockeOn

    anonymous (View Comment):

    Nobody wants to move into a location where the only people you can find to hire are those you poach from companies already established there. They were not looking for superstars, but rather the programming, product support, documentation writers, product designers, localisation specialists, translators, manufacturing and shipping people, and finance and accounting personnel needed to make the operation actually work. …

    Well said.  It should also be noted that in this regard, Silicon Valley has been eating its seed corn for at least a decade.  Given the Bay Area cost of living, and the high fixed cost of employment under the California regime, many of those support functions have been pushed elsewhere, including offshore.  Not only does this thin out the necessary infrastructure, but it also cuts off a major source of entrepreneurial spirit.  Many is the startup formed by a team who met and learned to trust each other doing grunt work, came up with an idea, and looked at their management and said “We can do it better than these [CoC]!”.  If those support and product teams are elsewhere, then so is that positive externality.  I don’t think it’s an accident that high tech appears to be in a consolidation phase around the platform players.

    • #7
  8. David Foster Member
    David Foster
    @DavidFoster

    I wrote about some earlier efforts at top-down technology-industry planning in Europe here:  Leaving a Trillion on the Table

    (although ‘trillion’ is way too small a number)

    • #8
  9. Randy Weivoda Moderator
    Randy Weivoda
    @RandyWeivoda

    Franz Drumlin (View Comment):
    However, the city and the state are ‘governed’ by the worst politicians in America. Both parties. The state of the state’s finances is almost comically venezuelan. The city has been run for decades by grasping mediocrities, almost exclusively Democrat, and the all-powerful unions worship at the altar of a cold, unyielding Status Quo.

    I agree with all the things you say that add up to Chicago being a great place to visit.  I also agree that between the domination by labor unions and corrupt politicians, it would seem to be a terrible place to set up a new large business, much less a whole industry.

    • #9
  10. David Foster Member
    David Foster
    @DavidFoster

    James Pethokoukis: The presence of superstars, along with some amount of good fortune, can transform the economy of a city or region. Jeff Bezos is a superstar. Mark Zuckerberg is a superstar.

    Jeff Bezos was not yet considered to be a superstar when he started Amazon, and Mark Zuckerberg was not yet considered to a superstar when Facebook was first created.

     

    • #10
  11. Big Green Inactive
    Big Green
    @BigGreen

    Macron’s tug at American talent was largely for domestic consumption so as to be seen to standing up to “stupid” America.

    The fact that it was for domestic consumption demonstrates the idiocy of the overall French-centric economic worldview. Namely that if the state isn’t funding, mandating, regulating or controlling, then industry will not grow or develop. That mindset is rotten to the core and they still don’t get it even though you would think they would begin to get the hint at some point.

    Last I checked, pulling out of the Paris Agreement isn’t stopping any American company from doing or investing in whatever they think will  create value

     

    • #11
  12. Hang On Member
    Hang On
    @HangOn

    Macron would do better to reform the grandes ecoles system and concentrate on infrastructure.

    • #12
  13. Seawriter Contributor
    Seawriter
    @Seawriter

    Hang On (View Comment):
    Macron would do better to reform the grandes ecoles system and concentrate on infrastructure.

    That is work. Getting “superstars” (to use anonymous’s scare quotes) to come to France? Magic, my friend. Click your heels together while reciting “There’s no place like France. There’s no place like France.” They will come and your nation’s troubles will be over.

    However, as Old Lodge Skins put it in Little Big Man, “Well, sometimes the magic works. Sometimes, it doesn’t.”

    Seawriter

    • #13
  14. Manny Member
    Manny
    @Manny

    As a mechanical engineer, I think this belief that software is the only thing that creates jobs is hokey.  There is still a place for good old fashion nuts and bolts technology.  Next time you sit in your car, ask yourself if you are riding on software or if the power to move that car is generated by software.  It’s not.  It’s still a vehicle with a combustion powered engine with metal, plastic, and chemicals, and even if we completely transformed to electric cars, that would still be the case.

    • #14
  15. Hang On Member
    Hang On
    @HangOn

    Seawriter (View Comment):

    Hang On (View Comment):
    Macron would do better to reform the grandes ecoles system and concentrate on infrastructure.

    That is work. Getting “superstars” (to use anonymous’s scare quotes) to come to France? Magic, my friend. Click your heels together while reciting “There’s no place like France. There’s no place like France.” They will come and your nation’s troubles will be over.

    However, as Old Lodge Skins put it in Little Big Man, “Well, sometimes the magic works. Sometimes, it doesn’t.”

    Seawriter

    He could get them to retire to Dijon to enjoy the food and the wine. And then teach the kids to play hockey. Or something.

    • #15
  16. I Walton Member
    I Walton
    @IWalton

    Tech is new and complex and spreading fast and while it’s important in its own right, it’s supportive of other things that matter just as much or more.  One reason new tech is so innovative and dynamic is that Washington hasn’t figured out how to regulate it and thus control it for its own benefit.  They will.   Making stuff remains the key to a healthy economy and we don’t need software engineers to make most stuff.  We don’t need to figure out how to get big tech, or anything else to move to flyover country.  We need to remove barriers to innovation, start ups, investment and profit making and education and training.  Get government out of the way,  all of it, local state and federal and it will happen and if it doesn’t happen everywhere, and it wont, people will move if we stop paying them to stay where they lost their last job.    There is little that we actually know about economic growth and change but a few things are obvious.  This is one of them.  It’s natural, it’s organic and it happens unless we make special efforts to keep it from happening.

    • #16
  17. Hang On Member
    Hang On
    @HangOn

    Manny (View Comment):
    As a mechanical engineer, I think this belief that software is the only thing that creates jobs is hokey. There is still a place for good old fashion nuts and bolts technology. Next time you sit in your car, ask yourself if you are riding on software or if the power to move that is generated by software. It’s not. It’s still a vehicle with a combustible powered engine with metal, plastic, and chemicals, and even if we completely transformed to electric cars, that would still be the case.

    Could not agree more. But our the guys who actually run the joint are lawyers, economists and such who haven’t a clue and they are told that it is software. And they get told this over and over again. So it must be true. Right? This is unfortunately the country we live in. The place for the nuts and bolts is Mexico and China.

    • #17
  18. genferei Member
    genferei
    @genferei

    James Pethokoukis: Aaron Ren: Fast Company’s “100 Most Creative People in Business” list [of 2010]

    And who is on this list, chosen by a certain strain of journo? (pdf)

    Number 1: Lady Gaga

    Number 3: Elizabeth Warren

    It’s a fascinating list, really. As an insight into the minds that created it. That it contains any information whatsoever about creativity in business is laughable.

    • #18
  19. David Foster Member
    David Foster
    @DavidFoster

    Manny (View Comment):
    As a mechanical engineer, I think this belief that software is the only thing that creates jobs is hokey. There is still a place for good old fashion nuts and bolts technology.

    Over at the GE blog, there is a post about the Bavarian man and his wife who created Concept Laser, a company specializing in 3-D metal printing machines (controlling interest now acquired by GE.)

    Frank Herzog was still in elementary school in the historic Bavarian city of Bamberg when he fell in love — with metals. So ardent was his passion that he later quit high school to pursue it. “I was young when I realized that I loved the material,” he says.

    and

    Herzog’s need to tinker made him drop out of high school. He spent the next three years as an apprentice in a factory, soaking up all he could about manufacturing. “I learned to drill, work with a lathe and a milling machine,” he says. But the program only increased his appetite and curiosity.

    Great story, but in the US I”m not sure that a man who fell in love with metals would get the same sort of support and encouragement as a man who fell in love with software.

    • #19
  20. Vectorman Member
    Vectorman
    @Vectorman

    Randy Weivoda (View Comment):

    Franz Drumlin (View Comment):
    However, the city and the state are ‘governed’ by the worst politicians in America. Both parties. The state of the state’s finances is almost comically venezuelan. The city has been run for decades by grasping mediocrities, almost exclusively Democrat, and the all-powerful unions worship at the altar of a cold, unyielding Status Quo.

    I agree with all the things you say that add up to Chicago being a great place to visit. I also agree that between the domination by labor unions and corrupt politicians, it would seem to be a terrible place to set up a new large business, much less a whole industry.

    I have been approached by a Chicago suburb company with a very disruptive technology, potentially making it the next Intel. They are trying to grow using local capital rather than getting investors from Silicon Valley. If they were in Indiana or Wisconsin, I might be tempted, as these states are (now) mostly Republican, but have enough Democrats to keep them honest. Illinois has no future until they eliminate government (i.e., union) pensions backed by the state’s Constitution.

    • #20
  21. David Foster Member
    David Foster
    @DavidFoster

    Steve Case (AOL founder, among other things) is driving an initiative to encourage more venture-funded startups in the American Midwest and other locations beyond SV:

    Rise of the Rest

    • #21
  22. genferei Member
    genferei
    @genferei

    David Foster (View Comment): (quoting the GE blog)
    Herzog’s need to tinker made him drop out of high school. He spent the next three years as an apprentice in a factory, soaking up all he could about manufacturing.

    I’ll admit I haven’t read the source article, but that doesn’t sound to me like he “dropped out” of High School. That sounds like he took the entirely normal, natural and widely applied apprenticeship path that is part of the German education system. Why make someone sit in a classroom for years pretending they’ll only be a full human being if they do a sociology degree when you could be teaching them to work with their hands as well as their brain?

    • #22
  23. David Foster Member
    David Foster
    @DavidFoster

    genferei (View Comment):
    I’ll admit I haven’t read the source article, but that doesn’t sound to me like he “dropped out” of High School. That sounds like he took the entirely normal, natural and widely applied apprenticeship path that is part of the German education system.

    It’s quite possible that the GE blogger used the “dropped out” terminology for headline impact purposes without really considering the German context.  But the key point here (my key point, at least) is that someone fascinated with lathes and milling machines is not likely in the US to be considered a potential ‘technology’ innovator in the same way as someone fascinated with software and social media.

    Speaking of GE and apprenticeships, there is a really interesting memoir by Gerhard Neumann, who played a big part in creating GE’s jet engine business and ran it for many years.  He grew up in Germany (with Jewish/Prussian parents) and apprenticed in an auto shop before entering engineering school.  This path was required of Germans; foreigners could enter engineering school directly.  Neumann felt the German path was much more likely to result in good practical engineering skills.

    I reviewed Neumann’s book here:  Herman the German

     

    • #23
  24. genferei Member
    genferei
    @genferei

    If we measure wealth in human terms like employment, food, clothing etc. then has any “tech superstar” – or even all “tech superstars” created as much wealth as Sam Walton? Of course, you could say the Wal*mart system has also led to vast unemployment, too… Still, compared to these real changes to real people, that folks hyperventilate about Twitter or Facebook instead of the box scores or who shot JR is neither here nor there. (Uber, on the other hand, seems to have real-world consequences in a way ‘the socials’ just don’t.)

    • #24
  25. Z in MT Member
    Z in MT
    @ZinMT

    Hang On (View Comment):

    Manny (View Comment):
    As a mechanical engineer, I think this belief that software is the only thing that creates jobs is hokey. There is still a place for good old fashion nuts and bolts technology. Next time you sit in your car, ask yourself if you are riding on software or if the power to move that is generated by software. It’s not. It’s still a vehicle with a combustible powered engine with metal, plastic, and chemicals, and even if we completely transformed to electric cars, that would still be the case.

    Could not agree more. But our the guys who actually run the joint are lawyers, economists and such who haven’t a clue and they are told that it is software. And they get told this over and over again. So it must be true. Right? This is unfortunately the country we live in. The place for the nuts and bolts is Mexico and China.

    I think this is only half right. I am involved from the outside in a number of high tech startups in the lasers and photonics industry, and while new hardware is usually the impetus for the innovation software ends up driving a majority of the development costs – and is what sells the innovative hardware as it makes the hardware usable for actual tasks. This is what I have noticed in my optics and photonics industry:

    The founder/entrepreneur is usually a PhD in Physics, because they are really smart, driven, and unless they are in the top 10% of Physics PhD’s that can get a tenure track Professorship position, their options in the workplace are weak, so they start a company after a Post-Doc or two. The next couple hires are also PhD physicists because they are friends and they need people with varied skills who are relatively cheap. Then they hire a mechanical engineer, and an electric engineer, or the rare optical engineer (great career move right now if you have any young folks interested). Then they hire a software guy, preferably someone with embedded software experience. Until about 10 employees you will see this mix of different engineering disciplines, but then after the 10th employee 4 out of 5 technical persons hired is software because the software needed to run the hardware, collect data, and process it is immense.

    • #25
  26. Franz Drumlin Member
    Franz Drumlin
    @FranzDrumlin

    Vectorman (View Comment):
    Illinois has no future until they eliminate government (i.e., union) pensions backed by the state’s Constitution.

    John Kass has a solution:

    http://www.chicagotribune.com/news/columnists/kass/ct-dissolving-illinois-kass-met-20170620-column.html

    • #26
  27. Z in MT Member
    Z in MT
    @ZinMT

    anonymous (View Comment):
    The final evidence I present against the superstar cult is how rare it is that one of these superstars succeeds more than once. It is a common pattern, which I call “serial entrepreneurship”, where somebody who enjoys tremendous success in a venture cashes out and then decides to do something great again in a related or entirely different field, even though they don’t need the money. Having met a number of people who did this, my belief is that one motivation is to prove that the first success wasn’t just luck. While there are exceptions, the most usual trajectory, even though they came into the second and subsequent ventures with rare experience and abundant wealth, is dismal failure: not often a big smash-up, but something that never really gets of the ground (which is the fate of 90%+ of all ventures, regardless of who starts them).

    I would disagree. Serial entrepreneurs produce more wealth than the rest.  My new congressman, Greg Gianforte, is one. He went to school at Stevens Institute of Technology in New Jersey and started a software company that sold for near $100 million. He then moved to MT to hunt and fish, but then started another company and that grew to 500 employees and sold to Oracle for $1.5 Billion. Just in my small town of Bozeman, MT I can identify at least four serial entrepreneurs that are consistently able to start and grow businesses that create real wealth.

    Now, none of these are superstars on the order of Gates, Zuckerberg, or Musk, but most jobs and wealth are not created by  a few mega 100 billion dollar corporation but by tens of thousands of 100 million dollar corporations, and millions of million dollar small businesses.

    I would argue that the lifeblood of an healthy local economy is serial entrepreneurs.

    • #27
  28. Steve C. Member
    Steve C.
    @user_531302

    Z in MT (View Comment):
    I would argue that the lifeblood of an healthy local economy is serial entrepreneurs.

    Certainly a benefit.

    I think the point is, a serial entrepreneur is successful more than once. Mister Market separating the lucky accidents from the gifted/motivated people.

    • #28
  29. drlorentz Member
    drlorentz
    @drlorentz

    Z in MT (View Comment):
    Then they hire a mechanical engineer, and an electric engineer, or the rare optical engineer (great career move right now if you have any young folks interested). Then they hire a software guy, preferably someone with embedded software experience. Until about 10 employees you will see this mix of different engineering disciplines, but then after the 10th employee 4 out of 5 technical persons hired is software because the software needed to run the hardware, collect data, and process it is immense.

    This is basically right, though I might quibble a bit with the proportions. However, we’ve found that the best software people to hire are ones who also have strong EE backgrounds because, at some point, the bits have to turn into electrons. Every software engineer we ever hired knew how to use a soldering iron even though they mostly worked on embedded systems. The term “software engineer” may leave people with the impression that these folks can only sit in front of screens tapping at keyboards. That’s true if the product itself is software but not otherwise.

    • #29
  30. Vectorman Member
    Vectorman
    @Vectorman

    drlorentz (View Comment):

    Z in MT (View Comment):
    Then they hire a mechanical engineer, and an electric engineer, or the rare optical engineer (great career move right now if you have any young folks interested). Then they hire a software guy, preferably someone with embedded software experience. Until about 10 employees you will see this mix of different engineering disciplines, but then after the 10th employee 4 out of 5 technical persons hired is software because the software needed to run the hardware, collect data, and process it is immense.

    This is basically right, though I might quibble a bit with the proportions. However, we’ve found that the best software people to hire are ones who also have strong EE backgrounds because, at some point, the bits have to turn into electrons. Every software engineer we ever hired knew how to use a soldering iron even though they mostly worked on embedded systems. The term “software engineer” may leave people with the impression that these folks can only sit in front of screens tapping at keyboards. That’s true if the product itself is software but not otherwise.

    If you are writing software for embedded systems, you have know something about the entire item, especially the hardware. Additionally, if your software has a Human-Machine Interface (HMI), you need to present information / control software that humans can learn quickly. Finally, when you get tired of being “pigeonholed” in software, you can become a Systems Engineer and add value to the entire program.

    As previously described, many new software engineers are not taught how to analyze and properly document software, which adds extra complexity and delays implementation.  Those with a true engineering mindset develop functional blocks and interfaces before writing one line of code. After identifying key items and testing small subroutines for proper operation, implementation can be quickly accomplished.

    • #30

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