It happens occasionally that Chicago’s tech startup scene makes national news. There’s Groupon, obviously; the Obama campaign snatching its tech guru from Threadless was big news in a city that has a thriving civic-data scene; more recently it’s the creation of the startup incubator 1871, as profiled in the Wall Street Journal. But it wouldn’t be a true story of note without someone from the coasts parachuting in and laying a good thick layer of cultural stereotypes onto the trend: the “Midwest Mentality,” as defined by PandoDaily writer Trevor Gilbert:
Which is another thing that Chicagoans and Midwesterners are rather enthusiastic about. While I’m no anthropologist, and have no recent census data at my disposal, a number of coastal transplants complained that people here got married too soon. Not high school marriages, but rather the idea of getting married at age 21 is no big deal. That’s fine, but it also means that the ecosystem can’t rely on the insane work hours of the independent, no responsibilities generation. Instead, you have a number of people who would normally be able to work into the night, but instead need to go home at 7 or 8 to spend time with their kids and families.
I do have Census data at my disposal, through the series of tubes connected to the magic screen at my desk. It shows that 20-34-year-old men are slightly more likely to be married in the Chicago MSA than in Palo Alto; women of that age in Palo Alto are substantially more likely to be married. This is not an argument that will get you very far either way, but, hey, data, more where it comes from.
I’m not a Chicago native; I’ve only been here a decade, so I don’t take these things as hard as some people do. But it reminds me of when people talk about how slow things move in the South, and how slow we talk, and how it’s a nice break from the big important city because everyone’s so nice there because of the weather and because they’re ambivalent to success. (Well bless your heart.) And I suspect the reason it caused a fuss doesn’t have so much to do with the substance of the article, which is actually mirrored by the Wall Street Journal’s piece on 1871.
Here’s Pando Daily:
According to native Chicagoans, Twitter couldn’t be built here for two key reasons. The first is that Chicago is not a city built to house fast scaling products (more on that in a later post).
And the WSJ:
“We struggle sometimes finding talent,” says Jake Nickell, the 31-year-old founder of SkinnyCorp LLC’s Threadless.com, an online T-shirt design company and online community of graphic-artists since 2000. The profitable company has about 100 employees.
As Groupon has grown from a small website to a 10,000-person organization, it has had to supplement its Chicago employee base. In late 2010, Groupon opened an office in Palo Alto, Calif. It has also added engineering talent by acquiring other start-ups. “We’ve creatively looked for ways to fill in any talent gaps,” says Julie Mossler, a spokeswoman for Groupon, whose technology center is in the River North area.
I don’t read much about Chicago or the ecosystem. Not startups that raise hundreds of millions in funding, or startups that are doing hundreds of millions in revenue. If someone like myself – whose job it is to read everything, everywhere – doesn’t know about some of the stronger companies here, you can bet that external investors and engineers don’t know about it.
Of course, Chicago’s level of investor activity [$650m in 2011] is dwarfed by the Silicon Valley area, where start-ups raised $12.6 billion last year, or the New York-area, where companies raised $3 billion last year, according to data from VentureSource.
Perhaps quotes and data would have made it read less like a gloss, but I think what ultimately bothered people was the rhetoric, for the same reason the New York Times irritated people when it headlined a story about Charlie Trotter with “Chicago Losing Chef Who Refined Its Stockyards Palate.” You know, stuff like this:
So when I say that Chicago is cold, you have two options. You can think, “Hey, he is just not used to it anymore,” or you can think, “Hey, it must be pretty cold up there.” When leaving Florida, one thing I hadn’t considered is just how cold Chicago would be. Know how people say Chicago is “the Windy City”? Guess what, it’s not just some metaphor for something. Turns out, Chicago is actually, well, windy. I know. BREAKING.
It’s not just us. Here’s the author on Newry, a small city in Northern Ireland not far from Belfast and Dublin, which is trying to build a small startup community. “You Will Not Be The Next Silicon Valley, Please Stop Trying.”
It is likely that they will be using their experience with livestock and agriculture, and will use it to build the next Y Combinator. Now, I’d be remiss if I failed to mention that sheep herding does in fact help startups. After all, in the cold winters, there’s nothing better than wool to keep you warm.
Get it? It’s funny because Ireland is a agrarian society. Sort of like Silicon Valley was 60 years ago.
A lot of people found reasons to hate the article; what bothered me was that it lumped decades of economic and intellectual history into vague pronouncements about personality. Silicon Valley had its first tech incubator in 1951. (Facebook is based there.) Stanford Industrial Park was owned and supported by Stanford University, the idea of its then-president (and electrical engineer) Frederick Ternan. Why would Stanford get into tech incubation?
One key contributor, undoubtedly, was Stanford University, which opened in 1891. By all accounts, the institution’s founders – lawyer, merchant, governor, senator and railroad magnate Leland Stanford, his influential wife, Jane Leland Stanford, and the founding president they appointed, David Starr Jordan – deliberately set out to build a college with a more practical bent than the elite private universities back east.
Stanford’s role in fostering the industry grew after 1927, when Frederick Terman (son of Lewis Terman, the noted Stanford psychologist and intelligence-test pioneer) began teaching radio engineering there. He went on to become chairman of the electrical engineering department, dean of engineering and, finally, provost of the whole university. Throughout his almost 40-year career, one of his chief preoccupations was encouraging and assisting local electronics businesses – and getting their help for the university and his students.
Chicago’s equivalent of Stanford, the University of Chicago, is defiantly non-practical, thanks in large part to Robert Maynard Hutchins, who very intentionally took it in the opposite direction of Terman. And Terman had good timing: Stanford became a technology hub just as the U.S. government was preparing to virtually fight the Cold War, and Terman was determined to soak up the federal dollars his university and its graduates had missed out on during World War II.
If any city should be feeling neglected, you’d think it would be Boston, not Chicago: not only does it have an elite, semi-practical university in Harvard, it has MIT, arguably the nation’s premier tech institution (its most prominent competition, naturally, is in California). And it did have something of a lead on Silicon Valley in the late 20th century, at a time when Chicago was in the mix; our one tech giant, Motorola, is a remnant of this era (PDF):
The continuing military spending during the Cold War created a large market for electronics devices and the firms grew steadily. And yet, by the mid-1950s Silicon Valley electronics employment remained small in comparison to Route 128 [in Massachusetts] (or even Chicago, one of the centers of the computer electronics and vacuum tube industries). At this point there was no critical core technology or anything in particular to distinguish Silicon Valley from other regions with greater concentrations of engineers and research facilities such as northern New Jersey [home of Bell Labs] and Los Angeles.
The catalyist for the shift is often credited to William Shockley, the Palo Alto native who co-invented the transistor at Bell Labs—another institution that could have been the foundation for a Silicon Valley—and won the 1956 Nobel in physics. He tried to get startup money from Raytheon and Rockefeller; failing that, he got money out of Los Angeles’s Beckman Instruments and set up shop in his hometown. His company immediately fell apart, but the engineers he brought to the city helped form the foundation of Silicon Valley:
Shockley proved to be an ineffective manager and the eight resigned in 1957 to form their own start-up…. Fairchild quickly became a technological leader in the transistor industry and spearheaded the transition to the integrated circuit. In 1960 Jean Hoerni, one of the Shockley defectors, invented the planar process that made mass production possible.
The “Traitorous Eight” included Robert Noyce (inventor of the microchip, “the Mayor of Silicon Valley") and Gordon Moore (co-founder of Intel); before it was the center of software creation, the region was a hardware hub, which is why it’s called Silicon Valley and not Social Networking Valley. Boston bet big on minicomputers; Silicon Valley bet big on semiconductors, hard disks, and networking. Having so much of the production chain centered in one place was crucial, for the same reasons that Shenzen’s industrial base is more important to Apple than its cheap labor. And the industrial base in Silicon Valley turned out to be the future:
“I think there’s a fairly simple explanation” for why Silicon Valley is ascendant, says Bill Kaiser, a partner at Greylock Venture Partners, a Boston-based venture capital firm that has roughly one-third of its portfolio invested each in Silicon Valley companies, in Boston-area ventures, and in companies located elsewhere around the country. “In the ’70s and early ’80s, the computer architectures driving the industry were developed by people like Digital, Prime, and Data General. With the overwhelming dominance of the PC, however, the center of heat and light for the PC is Intel as the microprocessor provider and Microsoft as the operating system provider. That results in all of the planets revolving around those two suns.”
Another member of the Traitorious Eight was Eugene Kleiner, who became the chief administrator for the T8’s new company and, in 1972, hooked up with Tom Perkins of Hewlett-Packard to create Kleiner Perkins, Silicon Valley’s first major venture capital firm, which helped the area move on from its dependence on East Coast capital. When it started, it was already the biggest VC firm in the world; it’s backed everyone from Netscape to Zynga.
Compare Stanford Industrial Park and Kleiner Perkins, 61 and 40 years old respectively, to, say, Lightbank and Excelerate. Silicon Valley had a critical mass of people, hardware, and money since before most Silicon Valley stars were born.
Does a “Midwestern Mentality” have anything to do with Chicago’s comparatively green startup scene? I reckon it could; a similar reason is cited in that 1997 Businessweek piece linked above on the stagnant Route 128 industry:
That view of Silicon Valley is echoed by John B. Landry, the former chief technology officer of Lotus and a senior consultant to IBM. “The Valley is a monoculture,” Landry says. “I don’t care about Larry Ellison’s suits or his Japanese garden. I’ll take Boston any day. People seem to have a better sense of what’s important in living a life.”
But such a vague explanation ignores vast differences in economic, political, and intellectual history. The seeds of Silicon Valley were planted generations ago—by Leland Stanford, Frederick Ternan, William Shockley, Robert Noyce, Gordon Moore, Eugene Kleiner, and others. If Ternan and Robert Maynard Hutchins had somehow switched places, or if Raytheon had seeded Shockley’s company, perhaps Chicago or Boston wouldn’t have fallen so far behind northern California. One development built on another, sometimes incidentally, sometimes quite intentionally. (If Kleiner Perkins-level money had been floating around here for the past 40 years, maybe we wouldn’t be so inclined to get hitched and start poppin’ out babies.)
Gilbert is casting about for books to read on Silicon Valley. I’d add William Cronon’s great Nature’s Metropolis: a broader look at how regions come to dominate industries thanks to the confluence of raw materials and capital, how Chicago came to be what it is, and most resonant, how virtual industries are built on the foundation of tangible ones:
The original decision to remove grain from its sacks was undoubtedly a pragmatic one, driven by the technological possibilities of the grain elevator. Probably no one foresaw that so simple an act would have such complex consequences, imposing a new symbolic order on Chicago’s marketplace and distancing it from the physical universe of fields and crops and rural nature. The shift from sack to elevator enabled grain traders to come indoors, to a market called ‘Change where sheets of paper would stand as surrogates for grain bought and sold in millions upon millions of invisible bushels.
Update: a famous Chicago tech innovator explains the Midwest Mentality:
Photograph: John Picken (CC by 2.0)Edit Module