Silicon Rust - Pacific Standard

Silicon Rust

Silicon Shore. Silicon Beach. Silicon Roundabout. How many different technology hubs can we have? Like the untethering of manufacturing from regional natural resources that crushed the Rust Belt, Silicon Valley's one-time advantage of a high concentration of venture capitalists matters less and less as the cost of technology falls.
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A steel plant in Bethlehem, Pennsylvania, that was demolished in 2007 and turned into a casino. (Photo: Jschnalzer/Wikimedia Commons)

A steel plant in Bethlehem, Pennsylvania, that was demolished in 2007 and turned into a casino. (Photo: Jschnalzer/Wikimedia Commons)

We have "Silicon Beach" and "Silicon Roundabout." Yesterday morning, I read about "Silicon Shore," located in Newcastle, U.K. The generic name for Silicon Whatever is Silicon Rust. As manufacturing became untethered from regional natural resources, industrial cities such as Pittsburgh began rusting. The rusting of innovation:

It used to be that venture capital was a prerequisite for starting a technology company. The software, hardware and disk storage needed cost millions of dollars. Entrepreneurs therefore had to begin their journey by writing a detailed business plan and pitching it to investors. Silicon Valley had a big advantage because of the concentration of venture capitalists on Sand Hill Road. But that is no longer the case, because the cost of technology has dropped exponentially. Entrepreneurs can beg or borrow the relatively small amounts of money they need from their friends and relatives. Or they can crowd-fund their startup, in the way in which Oculus did on Kickstarter.

If Vivek Wadhwa is correct about the plunging costs of innovation, then "location no longer determines success." Economist Enrico Moretti has similar expectations: "Cities that have been lagging behind-the Clevelands, the Topekas, and the Mobiles-will grow much faster." However, "the data don't support this view." Innovation Economy, 1; Vivek Wadhwa, 0.

To the contrary, Richey Piiparinen and I are putting the finishing touches on research with data that do support this view. Moretti's hindsight overlooked the current shifting trends lurking below business as usual in Silicon Valley. Bolting Atlanta for Indianapolis:

Living costs weren’t the only things on his mind, but they were a big factor in why he agreed to move Blue Pillar to Indianapolis in 2011.

“Honestly, the financial pressures of being in a startup, paying for private school, and living in an affluent suburb of Atlanta probably are why I did move,” Witter said.

Witter is among a growing number of people in the tech sector who have sought refuge in Indianapolis from skyrocketing living expenses in other cities, including technology hubs on the coasts.

When I pronounce that Silicon Valley is dying (i.e. the Innovation Economy is becoming untethered from geography), I gather people expect to see evidence of Pittsburgh-like exodus or feral houses as found in Detroit. Detroit's fall from the pinnacle of regional wealth in 1950 was, indeed, spectacular. But a few decades would go by before anyone really noticed. The term "Rust Belt" is a relatively recent creation, dating back to the 1984 presidential election. Walter Mondale said, “Mr. Reagan’s policy toward the industrial belt of America is ‘Let it rust.’” That's a good 30 years after the height of automotive Detroit and over 70 years after Pittsburgh's peak. Slowly bringing a frog to boil n'at. There isn't a flip-the-switch moment for the demise of manufacturing employment.

Before folks in Indianapolis or Cleveland start dancing in the street singing "Ding Dong Silicon Valley Is Dead," keep in mind the wide open possibilities Wadhwa is describing:

Indianapolis still has a lot of other cities to compete with when it comes to tech pay and cost of living.

Austin, Denver, Seattle, Nashville and Salt Lake City are just a few places that have their computer salaries still in sync with costs of living. And all five cities boast of their emerging tech scenes.

In most cases, recruiters say, transplants who come to Indianapolis already have connections to the area—like Blue Pillar’s Witter, who grew up in Indiana, or Interactive Intelligence’s Cole, whose fiancée attended an Indiana school.

“One of the most successful recruits from either the East or the West Coast is someone who’s got roots in Indiana and somewhere in the Midwest,” said Small, the Interactive Intelligence recruiter. “A large portion of us are drawn back to our families and our roots.”

Ah yes, the return on investment from brain drain. The more talent a place gave, the more it will get back as the Innovation Economy diffuses in search of cheaper overhead. I imagine this trend as a re-tethering of innovation jobs to geography. Talent production becomes the main attraction and the Legacy Economy diverges. It's morning again in Rust Belt America.

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