Thursday, September 01, 2016

Where is George Westinghouse when you need him?

Remember last month there was a nice story saying all was hunky dory in the state of entrepreneurial Pittsburgh: Tech startups surprised to find Pittsburgh's assets add up .  That and the more routine coverage of startups that makes it seem like we are being overrun with new firms. For example see: 15 Startups to Watch in 2015. I sometimes will look at stories like these from a decade or more ago to see what firms survived, if any.

The problem, as it has always been, is that by virtually every measure with hard, or semi-hard, data of entrepreneurial activity Pittsburgh is always ranked either very very low, or literally last. It's like we willfully don't believe any of the data.  One story that acknowledged our low ranking on startups focused in on an idea that it was a result of Pittsburgh being a relatively small metro area in the universe of regions compared. Problem is that Pittsburgh is the 27th or 28th largest metro area depending and if you are ranking the top 50, I think we actually are right in the middle, so how does that excuse mean anything?

Anyways, there is new data on all of this from the first ever Census Bureau Annual Survey of Entrepreneurs.  There is way way too much data in it to begin to parse here, but a few factoid headlines tell the tale for Pittsburgh.  See the benchmarking from the magazine Governing and their table of Metro area employment generated from new firms (link).  Which region is absolutely last there?

What is more troubling is even within the limited entrepreneurial activity here is the lack of diversity showing for Pittsburgh. Out of Kansas City there is a story showing some angst that they rank 8th from worst in the diversity of entrepreneurial activity.   Well, the region that is actually last - outright last - is again Pittsburgh.  So we are doing poorly overall and certainly doing poorly at minority owned firms.

While I know it may seem dated, written before most readers here were born, but many of us swear that the Rosetta Stone for understanding the long-standing lack of entrepreneurial activity here is the seminal journal article by former Pitt econ professor Ben Chinitz:  Contrasts in Agglomeration: New York and Pittsburgh..   If you are interested in the Pittsburgh economy in any way, you need to read every paragraph.   A modern variation on a theme is of course Mike Madison's: Contrasts in Innovation: Pittsburgh then and now.

If you want to dispute how bad we are doing here I suspect you want to throw out examples like maybe Google, or now Uber's growing offices here.  If so, there we are actually talking about very different things.  Yes, both firms are growing in Pittsburgh and generation employment growth for sure.Good things, but that is something different from organic firm creation.  Neither firm started here and it is a different dynamic to talk about how Pittsburgh is doing at firm relocation or branch expansion.

Looking for entrepreneurs is about new firm creation.  As Chinitz points out, the lack of new startups here goes back a long long time and he believed that was much a result of the steel and coal industries that long dominated Pittsburgh.  Obviously those industries are eviscerated, but its hard not to see the continuing threads of Chinitz's logic that are binding to this day.

If you ask me, the one true star of Pittsburgh's entrepreneural ecosystem was the historic Westinghouse Corporation.  Alone among the major firms of Pittsburgh, Westinghouse produced a steady stream of new entrepreneurs decade in and decade out much like you see out of Silicon Valley today.  George W. himself just had a different form of management that both encouraged that result, but it was then baked into the corporate ethos there that long outlived him. Long after he passed Westinghouse was a singular star in spinning out new firms and businesses compared to most any of the other large firms in Pittsburgh.

Thus the real travesty of Pittsburgh' recent  (as in recent decades) economic history is not when steel employment collapsed, but when the Big W hired Michael Jordan as CEO and he began a process to become a media company.  The purchase of CBS and the de-facto reverse merger into that media company lead to the dismantling of the vast research and development enterprise that had been a worldwide leader for almost a century.   Whether any of it made sense from a corporate profit point of view is debatable in itself, but the lack of appreciation for what was destroyed and its impact on the Pittsburgh region and sheer national innovation capacity really was criminal.  I'm sure Jordan was amply rewarded for his bold moves.

Note that is no disrespect to any of the parts of the old Westinghouse that remain, to include the Westinghouse Nuclear piece that comes closest continuing on the traditions of Westinghouse.  But the big difference is that Westinghouse Nuclear is very good in a very niche business. Old Westinghouse routinely produced new technologies that actually generated new firms across a panoply of entirely new industries.  The big Westinghouse R&D complex once located in Pittsburgh was also a big employer of new young engineers and scientists, which brought many to Pittsburgh and many of those folks stayed with many become successful tech entrepreneurs later on.   We lost most all of that and there exist few really big tech firms that have the luxury of hiring large cohorts of young engineers right out of school (fresh outs) and train them up. Virtually no firm has filled that role since W folded. So Pittsburgh today is at a major disadvantage in the long battle for talent.

Ok.  Not may left reading I am sure.  But I am going to stare at the new census entrepreneur data and see what nuggets of insight pop up.


Anonymous Anonymous said...

You betcha I read every word. Thanks, Chris - great context for more specific concerns regarding general dearth of minority business success in Pittsburgh.

Saturday, September 03, 2016 9:55:00 AM  
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